Compound annual growth rate is the smooth yearly rate that would take a starting value to an ending value over a period, and it is the fairest way to compare growth over different lengths of time. Revenue that went from $10,000 to $18,000 in five years grew 80% in total but 12.5% a year compounded. Enter the two values and the number of years (decimals such as 2.5 are fine) to get the CAGR, the total growth, the growth multiple and how long it would take to double at that rate.
CAGR Calculator
Compound annual growth rate smooths an uneven journey into one yearly figure: the constant rate that would have turned the starting value into the ending value over the period. The CAGR calculator works for anything that grows, from revenue and customers to a mutual fund or the price of a property. Growing from $10,000 to $18,000 in five years is 80% in total but a CAGR of 12.5% a year, and at that rate the amount doubles roughly every 5.9 years.
CAGR is the right way to compare investments or businesses held for different lengths of time, because plain total growth favours whoever waited longest. It hides volatility, though: two funds with the same CAGR can have had very different years, so look at the yearly figures as well before choosing. For a single sum with a known rate use the compound interest calculator to run the calculation forwards.
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Frequently Asked Questions
What is the CAGR formula?
CAGR = (ending value ÷ starting value)^(1 ÷ years) − 1. For $10,000 to $18,000 over 5 years: (1.8)^(0.2) − 1 = 12.5%.
What is the difference between CAGR and average annual growth?
The arithmetic average of yearly growth rates ignores compounding and overstates the result when growth is uneven. CAGR is the geometric rate that actually connects the start and end values.
Can CAGR be negative?
Yes. If the ending value is below the starting value the CAGR is negative, showing the average yearly decline.
