What it is
Month on month (MoM) is used in financial reporting and analysis to compare results in a certain month with those from the month right before it.
To help you visualize, suppose that a coffee shop sold 800 iced lattes in April 2023 and 1,000 iced lattes in May 2023. The growth rate from 800 to 1,000 is 25%.
This means that the shop saw a 25% month-on-month growth in iced latte sales in May.
What it means for you
MoM comparisons are useful when you want to know the monthly performance of a company or an investment product.
However, there are risks in using MoM growth as the only basis for investment decisions. After all, seasonal events can affect some companies and investments.
For example, retail companies usually see the highest sales during the months leading up to Christmas. Because of this, comparing sales in January vs. December may not be the best way to gauge a retail company’s overall health.
It’s ideal to also check year-on-year and quarter-on-quarter numbers to get the full picture of how a company or investment product is doing.
