Do you want to know how well your stock is doing? It can be challenging to calculate revenue growth without the help of a spreadsheet. In this guide, we will show you how to use Excel to track your stock's revenue growth over time. We will also provide a sample template that you can use to get started. Let's get started!
What is revenue growth, and why is it important?
Revenue growth refers to the increase in a company's total revenues over time. It is an important indicator of a business's health, as it reflects how well the company is doing at selling its products and services. Revenue growth can also be used to measure performance against competitors and future benchmark goals for the company.
In general, companies that are growing their revenue faster over a certain period of time tend to be more profitable and successful than those that are not. Therefore it is essential that you track your stock's revenue growth over time. At the same time, revenue growth numbers are very important to make projections for future years which come in handy for stock valuation.
How to calculate revenue growth in excel for stocks?
There are two types of revenue growth calculations you can perform. The first is the period-over-period method, while the second is the compounded growth method.
Period over-period growth
The period-over-period method allows you to compare the revenues from one specific period to another. To calculate this in Excel, you must input the appropriate data in two different columns. In the first column, you will list the revenue for one period, and in the second column, you will enter the revenue for another period. Once these numbers are entered, use the percentage change formula.
Percentage change = (Latest value – previous value)/previous value
For example, in 2022, Apple Inc. had revenues of $394.328 billion, and in 2021 $365.817 billion.
Period-over-period growth = (394.328-365.817)/365.817 = 7.79%
Therefore Apple achieved 7.79% growth in revenues between 2022 and 2023. This means the company increased its revenues by 7.79% in a year.
In the same way, you calculate yearly revenue growth, you can calculate revenue growth for other periods like quarterly, semiannually, etc.
Compounded growth rate
The compounded growth method takes into account the average growth rate over multiple periods. To calculate this in Excel, you must input the appropriate data in two different columns. In the first column, you will list the revenue for each period, and in the second column, you will enter the growth rates between these periods. Once these numbers are entered, use the CAGR formula to calculate the average growth rate of your stock's revenue over time.
Compounded annual growth rate (CAGR)= (final value/beginning value)^(1/time) – 1
For example, suppose you have 3 years of data with revenues in 2020 at $274.515 billion, 2021 at $365.817 billion, and 2022 at $394.328 billion. In that case, the compounded growth rate for that period can be calculated as follows:
Compounded annual growth rate = (394.328/274.515)^(1/3)-1 = 12.83%
This gives you a compounded growth rate of 12.83%, meaning that Apple achieved an average revenue growth of 12.83% over 3 years.
Once you have calculated your stock's revenue growth over time, you can use this information to make more informed decisions about investing in that stock.
Which growth calculation should you use?
When it comes to calculating revenue growth for stocks, the best approach will depend on your individual needs. For example, if you need to compare one period's revenues with another period's revenues, then you should use the period-over-period method. However, if you want to measure overall growth trends over multiple periods, then the compounded growth rate method would be more appropriate. Ultimately it is up to you to decide which approach works best for your particular situation. No matter which method you choose, understanding how to calculate revenue growth in Excel can help you make better investing decisions. Knowing the details of your stock's performance will also come in handy when analyzing its potential future returns.
Compare multiple companies' revenue growth
Rather than copy-pasting the revenue numbers and calculating the revenue growth for every single company you analyze. You can use Wisesheets to automatically get the revenue growth for thousands of stocks across 50+ global exchanges.
Using the WISE function, you can retrieve the revenue growth for apple from 2021 to 2022 like this:
=WISE("AAPL", "Revenue Growth", 2022)
Better yet, you can use this formula for hundreds of stocks at a time so you can analyze them all in one view like this:
By analyzing the revenue growth of multiple stocks, you can compare their performance and make a more informed decision regarding which company's stock you should invest in.
Learning how to calculate revenue growth in Excel can be a valuable tool for investors who need to make informed decisions on which stocks to invest in. With the period-over-period method, you can compare one period's revenues with another. And with the compounded growth rate method, you can measure overall growth trends over multiple periods. Additionally, Wisesheets can be used to automatically calculate the revenue growth from thousands of stocks in a single view. By understanding how to utilize these tools, you can make wise investments with confidence.