Definition:

1-year Revenue Growth Rate is a financial metric that measures the percentage increase or decrease in a company's revenue over a one-year period. It provides insight into how quickly a company is growing its sales.

Formula:

((Revenue at End of Year - Revenue at Start of Year) / Revenue at Start of Year) * 100

How to use the metric:

This metric is used to assess a company's growth performance over a year. Investors and analysts use it to compare the growth rates of different companies or to evaluate a company's growth trend over time. A higher growth rate indicates a rapidly expanding company, while a lower or negative rate may signal stagnation or decline.

Limitations:

The 1-year Revenue Growth Rate does not account for profitability, cost structure, or market conditions. It can be influenced by one-time events or accounting changes, which may not reflect the company's ongoing operational performance. Additionally, it does not provide insight into future growth potential.

Applies to:

This metric is applicable across various industries, particularly those with a focus on sales and revenue generation, such as retail, technology, and consumer goods. It is useful for companies where revenue growth is a key performance indicator.

Doesn't apply to:

Industries with long sales cycles or where revenue recognition is complex, such as construction or certain financial services, may not find this metric as useful. In these industries, revenue growth may not accurately reflect business performance due to project-based revenue or deferred revenue recognition.

Summary:

The 1-year Revenue Growth Rate is a valuable metric for assessing a company's sales growth over a year. While it provides a quick snapshot of growth, it should be used alongside other financial metrics to gain a comprehensive understanding of a company's financial health and performance.