
Sequential Growth
Sequential growth is a measure of a company's short-term financial performance that compares the results in a recent period to those of the period immediately preceding it. To calculate CAGR, divide the value of an investment at the end of the period in question by its value at the beginning of that period, raise the result to the power of one divided by the period length, and subtract one from the subsequent result. This can be written: CAGR \= ( Ending Value Beginning Value ) ( 1 \# of years ) − 1 where: CAGR \= compound annual growth rate \\begin{aligned}&\\text{CAGR}\\ = \\ \\left(\\frac{\\text{Ending Value}}{\\text{Beginning Value}}\\right)^{\\left(\\frac{1}{\\#\\text{ of years}}\\right)}{-1}\\\\&\\textbf{where:}\\\\&\\text{CAGR}\\ = \\ \\text{compound annual growth rate}\\end{aligned} CAGR \= (Beginning ValueEnding Value)(# of years1)−1where:CAGR \= compound annual growth rate Try using Investopedia's Compound Annual Growth Rate Calculator as well. Sequential growth is a measure of a company's short-term financial performance that compares the results in a recent period to those of the period immediately preceding it. Additional growth rates to consider when analyzing a company include a compound annual growth rate (CAGR). Like a company's compound annual growth rate, other somewhat similar metrics are also useful in analyzing a company's performance over time.

What Is Sequential Growth?
Sequential growth is a measure of a company's short-term financial performance that compares the results in a recent period to those of the period immediately preceding it. In financial reporting, sequential growth often compares results between two quarters.
A company might report 3% sequential sales growth, meaning that its revenue has increased by 3% since the previous quarter.



Understanding Sequential Growth
When considering how much weight to place on reports of sequential growth (or the lack thereof), it is important to keep in mind that seasonal fluctuations often affect a company's short-term performance. For example, a major retailer might report 10% sequential growth in the fourth quarter, then see a relative decline in revenue in the first quarter of the following year.
This does not necessarily indicate that the business is performing poorly; it could simply be the result of increased consumer spending during the holiday season, followed by a return to normal spending in the new year. It is important to look at a variety of indicators to get an accurate picture of a company's performance.
Example of Sequential Growth
A historical example is instructive for illustrating this concept. In April 2018, Amazon released results for Q1. These displayed increases in several segments for both year-over-year (YOY) and sequential growth. In Q1 2018, sales roles 43% annually to $51.0 billion, although the figure fell from the previous quarter by an estimated 15.5%. However, this is to be expected for Amazon and other retailers since that previous quarter (Q4 2017) included heightened sales figures because of the holidays.
In addition, operating cash flow (OCF) did relatively well in Q1 2018 at $18.2 billion, a 4% increase from Q1 2017 year and a 1% decrease from the preceding Q4 2017.
Sequential Growth and Additional Growth Rates
Sequential growth is one measure of a company’s progress. Additional growth rates to consider when analyzing a company include a compound annual growth rate (CAGR).
CAGR is used to measure an investment's return or a company's performance, assuming steady growth over a specified period of time. CAGR is widely used because of its simplicity and flexibility, and many firms use it to report and forecast earnings growth.
To break it down further, CAGR is the mean annual growth rate of an investment over a specified period of time greater than one year.
Calculating Compound Annual Growth Rate (CAGR)
To calculate CAGR, divide the value of an investment at the end of the period in question by its value at the beginning of that period, raise the result to the power of one divided by the period length, and subtract one from the subsequent result.
This can be written:
CAGR = ( Ending Value Beginning Value ) ( 1 # of years ) − 1 where: CAGR = compound annual growth rate \begin{aligned}&\text{CAGR}\ = \ \left(\frac{\text{Ending Value}}{\text{Beginning Value}}\right)^{\left(\frac{1}{\#\text{ of years}}\right)}{-1}\\&\textbf{where:}\\&\text{CAGR}\ = \ \text{compound annual growth rate}\end{aligned} CAGR = (Beginning ValueEnding Value)(# of years1)−1where:CAGR = compound annual growth rate
Try using Investopedia's Compound Annual Growth Rate Calculator as well.
Related terms:
Average Annual Growth Rate (AAGR)
Average annual growth rate (AAGR) is the average increase in the value of an investment, portfolio, asset, or cash stream over the period of a year. read more
Accounting
Accounting is the process of recording, summarizing, analyzing, and reporting financial transactions of a business to oversight agencies, regulators, and the IRS. read more
Annualized Total Return
Annualized total return gives the yearly return of a fund calculated to demonstrate the rate of return necessary to achieve a cumulative return. read more
Annual Percentage Rate (APR)
Annual Percentage Rate (APR) is the interest charged for borrowing that represents the actual yearly cost of the loan, expressed as a percentage. read more
Compound Annual Growth Rate (CAGR)
The compound annual growth rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending one. read more
Consumer Spending
Consumer spending is the amount of money spent on consumption goods in an economy. read more
Financial Statements , Types, & Examples
Financial statements are written records that convey the business activities and the financial performance of a company. Financial statements include the balance sheet, income statement, and cash flow statement. read more
Growth Rates
Growth rates are the percentage change of a variable within a specific time. Discover how to calculate growth rates for GDP, companies, and investments. read more
Operating Cash Flow (OCF)
Operating Cash Flow (OCF) is a measure of the amount of cash generated by a company's normal business operations. read more
Quarter on Quarter (QOQ)
Quarter on quarter (QOQ) is a technique for calculating the percentage difference between one fiscal quarter and the previous fiscal quarter. read more