CAGR Calculator

When you need to compare the growth rate of investments, revenue, or any financial metric across different time periods, compound annual growth rate (CAGR) is the gold standard measurement.

Reviewed by: CalcMojo Editorial Team

This CAGR calculator takes a beginning value, ending value, and time period, and returns the annualized growth rate that would produce that result if growth were perfectly smooth, eliminating the noise of year-to-year volatility.

CAGR is the metric professional investors and analysts use to evaluate fund performance, the figure companies cite in earnings presentations to describe revenue growth, and the number you need when comparing two investments held for different lengths of time. A stock that returned 80% over 5 years and a bond fund that returned 30% over 3 years are not directly comparable by total return alone. CAGR normalizes them: 12.5% versus 9.1% annually, making the comparison straightforward.

Enter your starting value, ending value, and the number of years, and get your CAGR instantly. The calculator also shows the total return, absolute gain, and a year-by-year growth projection.

How CAGR Is Calculated

The compound annual growth rate formula is:

CAGR = (Ending Value / Beginning Value)^(1/n) – 1

Where:

  • Ending Value = the final value of the investment or metric
  • Beginning Value = the starting value
  • n = the number of years

For example, if you invested $10,000 and it grew to $18,000 over 5 years:

CAGR = ($18,000 / $10,000)^(1/5) – 1 = (1.8)^(0.2) – 1 = 1.1247 – 1 = 0.1247 = 12.47%

This means your investment grew at an average annualized rate of 12.47% per year. Note that this does not mean it grew by exactly 12.47% each year. The actual yearly returns may have varied widely. CAGR represents the smoothed, annualized equivalent rate that would have produced the same end result with perfectly steady growth.

The beauty of CAGR is that it captures the compound growth effect in a single number. Unlike an arithmetic average of yearly returns, CAGR accounts for the fact that gains and losses compound on each other. It tells you the rate at which your money actually grew, not the average of individual year rates.

CAGR vs Average Annual Return

This distinction is critical and frequently misunderstood. Consider an investment with the following annual returns over 3 years: +40%, -20%, +30%.

Arithmetic average return: (40 + (-20) + 30) / 3 = 16.7% per year.

Actual result: Starting with $10,000: Year 1: $14,000. Year 2: $11,200. Year 3: $14,560. Total return: 45.6%.

CAGR: ($14,560 / $10,000)^(1/3) – 1 = 13.3% per year.

The arithmetic average of 16.7% significantly overstates the actual annualized growth of 13.3%. This happens because losses have a disproportionate impact on compounding: a 20% loss requires a 25% gain just to break even. The arithmetic average ignores this asymmetry; CAGR captures it.

This is why investment fund prospectuses report annualized returns (CAGR), not arithmetic average returns. It is also why CAGR is the correct metric for evaluating any investment’s historical performance. Use the Investment ROI Calculator for total return and ROI calculations that complement CAGR analysis.

Using CAGR to Compare Investments

CAGR’s greatest practical value is enabling apples-to-apples comparison of investments or metrics across different time periods.

Stock investment comparison:

  • Investment A: $20,000 grew to $45,000 over 8 years. CAGR = 10.7%.
  • Investment B: $15,000 grew to $28,000 over 5 years. CAGR = 13.3%.
  • Investment C: $50,000 grew to $120,000 over 12 years. CAGR = 7.5%.

Without CAGR, you might be drawn to Investment C’s impressive $70,000 absolute gain. But CAGR reveals that Investment B delivered the strongest annualized performance. The absolute gain was smaller only because less capital was invested over a shorter period.

Benchmarking against the market:

  • Your portfolio’s 5-year CAGR: 9.2%.
  • S&P 500 5-year CAGR: 11.5%.
  • Aggregate bond fund 5-year CAGR: 3.8%.

Your portfolio underperformed the stock market benchmark but significantly outperformed bonds, suggesting your returns are consistent with a balanced portfolio. CAGR makes this comparison immediate and meaningful.

Revenue and business growth:

  • Company A revenue: $5M to $18M over 4 years. CAGR = 37.8%.
  • Company B revenue: $50M to $95M over 4 years. CAGR = 17.4%.

Company B is larger in absolute terms, but Company A is growing more than twice as fast on a percentage basis. For investors evaluating growth potential, CAGR is the relevant metric.

CAGR for Business and Revenue Analysis

Beyond investments, CAGR is widely used in business analysis to measure growth of revenue, earnings, customer base, market share, and virtually any metric that changes over time.

Revenue CAGR is one of the most commonly cited figures in investor presentations and annual reports. A company reporting $100M in revenue growing at a 25% CAGR projects to $305M in 5 years. This figure is more meaningful than citing individual year growth rates because it smooths out seasonal variations, one-time events, and year-to-year fluctuations.

Earnings per share (EPS) CAGR shows how fast a company’s profitability is growing on a per-share basis, accounting for share dilution or buybacks.

Customer growth CAGR helps SaaS companies and subscription businesses demonstrate their growth trajectory to investors and analysts.

When using CAGR for business analysis, be aware of its limitations. CAGR does not reveal the growth path between the start and end points. A company could have grown steadily, or it could have experienced wild swings with a recent spike that inflates the CAGR. Always examine the underlying annual data alongside the CAGR figure.

Limitations of CAGR

While CAGR is an essential metric, it has important limitations.

CAGR hides volatility. Two investments can have identical CAGRs but very different risk profiles. Investment A might grow steadily at 10% per year. Investment B might swing between -30% and +60% but end up with the same CAGR. The investor experience and risk are vastly different. For risk-adjusted comparisons, use the Sharpe ratio or examine standard deviation alongside CAGR.

CAGR depends heavily on start and end dates. The same investment can show dramatically different CAGRs depending on the chosen time period. Measuring the S&P 500 from a market peak to a trough produces a low or negative CAGR, while measuring from trough to peak produces an inflated CAGR. Always use time periods that cover full market cycles or standard reporting periods to avoid cherry-picking.

CAGR does not account for cash flows. If you added or withdrew money during the investment period, CAGR on the starting and ending balances does not accurately reflect your personal return. For portfolios with multiple cash flows, use the Internal Rate of Return (IRR) or the money-weighted rate of return instead.

CAGR assumes reinvestment. The formula implicitly assumes that all gains are reinvested at the same CAGR rate. In practice, dividends may be spent rather than reinvested, or reinvestment opportunities may not match the original rate.

CAGR should not be extrapolated indefinitely. A 30% CAGR on a small startup’s revenue is not sustainable over 20 years. Growth rates naturally decelerate as companies and investments mature. Use CAGR for historical analysis and short-to-medium-term projections, not for extrapolating decades into the future.

CAGR and the Rule of 72

The Rule of 72 provides a quick way to estimate CAGR or doubling time without a calculator. The relationship works in both directions:

Years to Double = 72 / CAGR

If an investment has a CAGR of 12%, it doubles approximately every 72 / 12 = 6 years.

CAGR to Double in n Years = 72 / n

If you want your money to double in 8 years, you need a CAGR of approximately 72 / 8 = 9%.

This shortcut is useful for quick mental math during investment discussions, retirement planning, or business growth conversations. For precise calculations, use this calculator or the Compound Interest Calculator to model exact growth scenarios.

Practical Examples

Example 1: 401(k) growth evaluation. Your 401(k) was worth $45,000 five years ago and is now worth $78,000. CAGR = ($78,000 / $45,000)^(1/5) – 1 = 11.6%. This outperforms a balanced 60/40 portfolio benchmark of approximately 7% to 8% CAGR, suggesting strong performance or favorable timing.

Example 2: Real estate appreciation. You bought a home for $280,000 eight years ago. Its current market value is $420,000. CAGR = ($420,000 / $280,000)^(1/8) – 1 = 5.2%. This is slightly above the historical national average of 3% to 5% home appreciation.

Example 3: Business valuation. A startup’s revenue grew from $500,000 to $3.2M over 4 years. CAGR = ($3,200,000 / $500,000)^(1/4) – 1 = 59.1%. This is an impressive growth rate that would be attractive to investors, though sustainability at this rate is unlikely as the company scales.

This calculator provides estimates for informational purposes only. It is not financial advice. Results may not reflect your actual loan terms, tax situation, or investment returns. Consult a licensed financial advisor, CPA, or investment professional before making financial decisions.

Frequently Asked Questions

What does CAGR stand for?

CAGR stands for Compound Annual Growth Rate. It measures the annualized rate of return for an investment or metric over a specified time period, assuming steady compounding. It is the standard metric for comparing growth across different time periods and investments.

How is CAGR different from average annual return?

CAGR uses the actual beginning and ending values to calculate the smoothed annualized growth rate that accounts for compounding. Arithmetic average return simply averages individual year returns, which can overstate actual growth when returns are volatile. CAGR is always a more accurate representation of actual compounded growth.

What is a good CAGR for investments?

The S&P 500 has delivered a CAGR of approximately 10% before inflation historically. A diversified portfolio typically targets 7% to 9% CAGR after fees. Bonds average 3% to 5%. Any investment consistently delivering a CAGR above its benchmark is performing well. Context matters: higher CAGR usually means higher risk.

Can CAGR be negative?

Yes. If the ending value is less than the beginning value, CAGR is negative. A $10,000 investment declining to $7,000 over 3 years has a CAGR of approximately -11.2%, meaning it lost 11.2% per year on an annualized basis.

How does CAGR relate to the Rule of 72?

Divide 72 by the CAGR to estimate how many years it takes for the investment to double. At a 9% CAGR, money doubles approximately every 8 years. Conversely, to find the CAGR needed to double in a given number of years, divide 72 by the target years.

Should I use CAGR or IRR?

Use CAGR when you have a simple starting value, ending value, and time period with no intermediate cash flows. Use IRR (Internal Rate of Return) when there are multiple contributions, withdrawals, or irregular cash flows during the investment period. For regular investment accounts with ongoing contributions, IRR is more accurate.

How do I calculate CAGR in Excel?

Use the formula =((EndValue/BeginValue)^(1/Years))-1. Alternatively, use the RATE function: =RATE(Years,0,-BeginValue,EndValue). Both methods produce the same result. Format the cell as a percentage.

Can I use CAGR to predict future returns?

Historical CAGR can inform expectations but should not be treated as a prediction. Past performance does not guarantee future results. Growth rates can change due to market conditions, economic factors, and company-specific events. Use historical CAGR as one input among many when making projections.

Sources & Methodology

  • CAGR calculated using the standard formula: (Ending Value / Beginning Value)^(1/n) – 1, the universally accepted formula in investment analysis and corporate finance.
  • S&P 500 historical return data sourced from NYU Stern School of Business Damodaran Online dataset and Standard & Poor’s published data.
  • CAGR vs arithmetic average comparison based on standard financial mathematics as described in CFA Institute curriculum materials.
  • Rule of 72 derivation from the natural logarithm approximation: t = ln(2) / ln(1 + r) ≈ 72/r for rates between 6% and 10%.
  • IRR (Internal Rate of Return) methodology referenced from CFA Program curriculum and standard corporate finance textbooks.

Default rates shown are illustrative. Always verify current rates with your lender/provider. Data accurate as of: March 2026