How to Calculate CAGR
What is CAGR?
CAGR (Compound Annual Growth Rate) measures the smoothed annual growth rate of an investment over a period, as if it grew at a steady rate each year. It is the standard metric for comparing investment performance over different time periods.
Step-by-Step Guide
- 1CAGR = (End Value / Start Value)^(1/years) − 1
- 2It represents the hypothetical constant rate that would produce the same result
- 3Ignores volatility — two investments with the same CAGR can have very different risk
- 4Always lower than or equal to the arithmetic average annual return
Worked Examples
Input
$10,000 → $18,000 in 5 years
Result
CAGR = 12.47%
(18/10)^(1/5) − 1 = 0.1247
Input
Revenue: $2M → $8M over 4 years
Result
CAGR = 41.4%
Strong business growth metric
Ready to calculate? Try the free CAGR Calculator
Try it yourself →