CAGR Calculator
The CAGR Calculator finds the compound annual growth rate between two values: the constant yearly rate that would grow the first value into the second. Use it to compare investments, business revenue, or anything else that grows over several years.
CAGR
The steady yearly rate that grows a start value into an end value.
FAQs
What is the difference between CAGR and average return?
An average of yearly returns ignores compounding, while CAGR includes it. If an investment gains 100% one year and loses 50% the next, the average return is 25%, but you are back where you started, so the CAGR is 0%. CAGR tells the truer story.
Can CAGR be negative?
Yes. If the end value is lower than the start value, the CAGR is negative, showing the steady yearly rate of decline. For example, $10,000 shrinking to $8,000 over 2 years is a CAGR of about -10.6%.
How it works
CAGR stands for compound annual growth rate. It answers a simple question: if something grew smoothly at the same rate every year, what would that rate be? It smooths out bumpy, up-and-down growth into one steady number you can compare across investments and time periods.
The formula is: (end value / start value) raised to the power of (1 / years), minus 1. The calculator applies it for you and can also work backwards, finding the end value or the years needed when you know the rate.
Worked example: an investment grows from $10,000 to $16,105 over 5 years. Divide 16,105 by 10,000 to get 1.6105, take the 5th root, and subtract 1. The CAGR is exactly 10.0% per year.
A second example: revenue grows from $5,000 to $8,000 over 3 years. That is (8,000 / 5,000)^(1/3) - 1, which gives a CAGR of about 17.0%. Same formula, very different growth story, and now the two are directly comparable.
CAGR describes the past; it does not predict the future. A fund with a 12% CAGR over five lucky years might earn far less next time. Use it to understand what happened, then judge separately what is likely to happen next.
Why CAGR Beats Average Return
Average return is the number most people reach for, and it is often misleading. The classic trap: an investment rises 100% in year one and falls 50% in year two. The simple average is +25% a year, which sounds great. The reality is you have exactly what you started with, and CAGR correctly reports 0%.
The reason is compounding. Returns multiply, they do not add, so any honest multi-year rate has to be a geometric one. Whenever someone quotes a multi-year average, ask whether it is a CAGR. If it is not, the number is flattering the past.
CAGR in Plain English: The Formula
The formula looks intimidating but says something simple: find the total growth multiple, then spread it evenly across the years. The exponent (1 / years) is what spreads it. Without that step you would just have the total return, like 61% over five years, which tells you nothing about the yearly pace.
Try it on round numbers: $1,000 doubling to $2,000 in 10 years. The total multiple is 2, and 2^(1/10) - 1 is about 7.2% a year. That 7.2% is the famous doubling rate behind the rule of 72, which says money doubles in roughly 72 / rate years.
What CAGR Does Not Tell You
CAGR hides the ride. Two investments can share a 10% CAGR while one glides upward and the other crashes and recovers. The smooth number says nothing about the sleepless nights in between, so never judge risk from CAGR alone.
It also hides timing. A CAGR measured from a market low looks fantastic; measured from a peak, it looks terrible. Same investment, different start date, different story. When comparing CAGRs, always check that the time periods match, or the comparison is meaningless.