CAGR Calculator
Enter a starting value, an ending value and the number of years to find the compound annual growth rate. The default example grows at 14.29% a year.
How the CAGR calculator works
CAGR stands for compound annual growth rate. It is the single yearly rate that would take a value from where it started to where it ended, if it grew by the same percentage every year. Real investments, revenue and user counts rarely move in a straight line, so CAGR smooths the path into one comparable number.
Enter the beginning value, the ending value and the number of years between them. The calculator returns the CAGR, the total growth over the whole period, the dollar gain and the simple average annual growth, so you can see how far a plain average overstates or understates compounding.
The formulas
Example: A balance that grows from $10,000 to $19,500 over 5 years has a CAGR of 14.29%. Total growth is 95%, a gain of $9,500.00. Dividing total growth by 5 gives a simple average of 19% a year, which is higher than the CAGR because it ignores compounding. These are illustration numbers, not a forecast.
Limits to keep in mind
CAGR only looks at the first and last values. Two investments with the same CAGR can have very different ups and downs in between, and a big swing right at the end date can change the answer. The beginning and ending values must both be positive, and the years must be greater than zero, or the formula has no real result. CAGR also does not include deposits or withdrawals made during the period. If money was added along the way, use an IRR calculation instead. Past growth does not guarantee future results, and this tool is for general information, not financial advice.
To project balances forward at a steady rate, use the compound interest calculator.
As a check, a CAGR of zero means the ending value equals the beginning value. A negative CAGR means the value shrank. If your result looks odd, confirm that the years entered match the gap between the two dates and that both values use the same units, such as before-fee or after-fee dollars.
Common uses
People use CAGR to compare investments that were held for different lengths of time, to describe how fast revenue or a customer base grew, and to set a target growth rate. You can also run the formula in reverse. To find what a value reaches after a number of years at a chosen rate, multiply the beginning value by (1 + rate) raised to the number of years. If you are comparing two options, make sure both use the same start and end dates, because shifting the window by even a year can change the CAGR a lot. When the period is shorter than a year, enter the length as a decimal, such as 0.5 for six months, though annualizing short periods can exaggerate the result.
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Frequently asked questions
What is a good CAGR?
It depends on the asset and the time period. Compare a CAGR with a relevant benchmark over the same dates, and remember it is a smoothed figure, not a guarantee.
How do I calculate CAGR in Excel?
Use =(end/begin)^(1/years)-1, or the RATE function with =RATE(years,,-begin,end). Both give 14.29% for the default example.
Why is CAGR lower than the simple average growth?
Compounding means each year grows from a larger base. In the example, the simple average is 19% while the CAGR is 14.29%.
Can CAGR be negative?
Yes. If the ending value is lower than the beginning value, CAGR is negative, as long as both values are positive.
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