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CAGR Calculator

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Find the compound annual growth rate (CAGR) - the smoothed, year-over-year growth rate that gets you from a starting value to an ending value over time.

CAGR Calculator

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CAGR
20.11%
Total growth
150.00%

The formula

CAGR = ( (Ending value / Beginning value)^(1/years) - 1 ) x 100
Example

Revenue growing from $10,000 to $25,000 over 5 years: total growth = 150%, but CAGR = (25000/10000)^(1/5) - 1 ≈ 20.11% per year - the smoothed annual rate that compounds to the same result.

Step-by-step guide

  1. Enter the beginning value - revenue, an investment, or any metric you're tracking over time.
  2. Enter the ending value and the number of years between them.
  3. Read the CAGR - a single smoothed rate, distinct from the raw total growth percentage.

Why CAGR is preferred over a simple average growth rate

Averaging each year's individual growth rate (an "arithmetic mean") can be misleading for anything that compounds, since it doesn't account for the base changing each year - a 50% loss followed by a 50% gain averages to 0%, but actually leaves you down 25% overall. CAGR instead calculates the single constant annual rate that, compounded consistently, gets you from the exact starting point to the exact ending point - a more accurate way to describe growth over multiple years, especially when year-to-year growth was uneven.

Common mistakes

Dividing total growth by the number of years to estimate an "annual rate" - this simple division ignores compounding and overstates or understates the true CAGR, especially over longer periods.
Assuming CAGR reflects actual year-to-year performance - CAGR smooths everything into a single hypothetical steady rate, which can mask real volatility or a rough year in the middle of the period.

Frequently asked questions

What's the difference between CAGR and average annual growth rate?

Average annual growth rate typically averages each individual year's percentage change, which can be skewed by any single unusual year. CAGR instead calculates one consistent compounding rate that connects the true starting and ending values directly.

Can CAGR be negative?

Yes - if the ending value is lower than the beginning value, CAGR will be negative, representing an average annual decline over the period.

Is CAGR useful for comparing two different businesses or investments?

Yes - since it normalizes growth into a single annual rate, CAGR is commonly used to fairly compare investments, companies, or metrics that grew over different time periods or from different starting sizes.

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