What is CAGR?
CAGR (Compound Annual Growth Rate) measures the average annual rate at which a value has grown over a period of time, assuming the growth occurred at a steady compounded rate.
A CAGR calculator makes it easy to work out this annualized growth rate. Enter the starting value, ending value, and period to get the CAGR as a percentage. This calculator also works in reverse: give it any three of the four variables and it solves for the fourth.
CAGR is commonly used to measure and compare the historical growth of investments, businesses, revenue, profits, portfolios, and other values that change over time.
How to calculate CAGR
The CAGR formula is:
CAGR = (Ending Value / Beginning Value) ^ (1 / Number of Years) − 1To express CAGR as a percentage, multiply the result by 100. Where:
- Beginning Value is the value at the start of the period.
- Ending Value is the value at the end of the period.
- Number of Years is the length of the period being measured.
Rearranging the same formula gives the other three variables, which is what the four modes above do:
Ending = Start × (1 + r) ^ nStarting = End ÷ (1 + r) ^ n
Years = ln(End / Start) ÷ ln(1 + r)
CAGR calculation example
Suppose an investment grows from $10,000 to $15,000 over 5 years:
CAGR = (15,000 / 10,000) ^ (1/5) − 1 ≈ 8.45%The investment would have needed to grow at a compounded rate of about 8.45% per year to get from $10,000 to $15,000 over five years.
It does not mean the investment actually returned exactly 8.45% every year. CAGR represents a smoothed annual growth rate across the entire period.
How to use this calculator
- Pick what you want to solve for: growth rate, ending value, starting value, or period.
- Fill in the other three fields. The period takes years and months, so five and a half years is 5 years + 6 months.
- The result updates as you type.
The values do not have to represent money. You can use the calculator for revenue, users, sales, website traffic, market size, or any other metric.
What is CAGR used for?
CAGR is useful when you want to understand how quickly something has grown over multiple years. For example:
- Working out the annualized growth rate of an investment.
- Measuring revenue or profit growth for a business.
- Comparing the historical performance of different investments.
- Tracking growth in users, customers, sales, or other business metrics.
- Comparing growth rates across periods of different lengths.
- Projecting a value forward at an assumed rate.
Because CAGR converts growth into an annualized percentage, it makes different growth periods easier to compare.
CAGR vs. total return
Total return measures how much a value increased or decreased over the entire period. CAGR takes the length of that period into account and expresses the change as an annualized compounded growth rate.
An investment growing 50% over two years and another growing 50% over ten years have the same total growth but very different CAGRs — 22.5% against 4.1%.
Limitations of CAGR
CAGR only uses the beginning value, ending value, and time period. It says nothing about what happened between those two points.
A value could rise and fall sharply during the period and still show the same CAGR as one that grew steadily. CAGR therefore does not measure volatility or risk, and a historical CAGR does not guarantee future performance.
CAGR calculator FAQ
What does CAGR stand for?
CAGR stands for compound annual growth rate. It represents the annualized rate of growth between a starting value and an ending value over a specified period.
What is the formula for CAGR?
CAGR = (Ending Value / Beginning Value) ^ (1 / Number of Years) − 1. Multiply the result by 100 to convert it into a percentage.
Can this calculator work backwards?
Yes. Switch the "solve for" mode to calculate the ending value from a growth rate, the starting value needed to reach a target, or how long a given rate takes to get from one value to another.
Does it handle part-years?
Yes. The period field takes years and months, so five years and six months is calculated as 5.5 years rather than rounded. If you would rather work from actual calendar dates, use the two-date calculator.
Can CAGR be negative?
Yes. If the ending value is lower than the beginning value, the CAGR is negative. A negative CAGR represents an annualized decline over the period.
Is CAGR the same as an annual return?
Not necessarily. CAGR is a smoothed annualized growth rate between two values. It does not show the actual return achieved during each individual year.
Can CAGR be used for things other than investments?
Yes — company revenue, profits, users, sales, market size, website traffic, and any other measurable value.
What is a good CAGR?
There is no single figure that is good in every situation. It depends on what you are measuring, the time period, risk, inflation, and the relevant benchmark. CAGR is most useful compared against alternatives or against past performance.