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Compound Annual Growth Rate Calculator

The compound annual growth rate (CAGR) is a standard way to describe the smoothed year-over-year growth of a value such as revenue, portfolio value, tuition costs, or market size over a multi-year period.

This calculator computes the CAGR from your beginning value, ending value, and time period, returning the constant annual rate that would have transformed the starting amount into the ending amount if all gains had been reinvested.

Analysts, corporate finance teams, and investors rely on CAGR to compare long-term growth across companies, sectors, and indices while filtering out noisy year-to-year swings that can distort simple average returns.

Updated Dec 2, 2025

Results

Compound annual growth rate (CAGR)

0.00%

Total growth multiple

1.5

Methodology

CAGR is a geometric mean growth rate. It answers the question: if your value had grown at a steady rate every year, what annual percentage change would take you from the beginning value to the ending value over the chosen number of years.

The standard formula for compound annual growth rate is: CAGR = (Ending value / Beginning value) ^ (1 / Number of years) − 1. This calculator implements that formula directly using your inputs.

Step 1: Divide the ending value by the beginning value to obtain the overall growth multiple over the full period. Step 2: Raise this ratio to the power of one divided by the number of years to convert it to an equivalent annual growth factor. Step 3: Subtract one to express the annualized factor as a growth rate. The result can then be shown as a percentage.

Because CAGR is a geometric measure, it does not show the path of year-by-year results. Very volatile series with big ups and downs can have the same CAGR as a smooth series with identical start and end values. For this reason, professionals typically use CAGR alongside risk metrics such as standard deviation, drawdowns, or tracking error.

CAGR is most meaningful when the beginning value is strictly positive and the time period is longer than one year. If the beginning value is zero or negative, or if the series includes large negative values that change sign, CAGR can become undefined or misleading and other measures such as internal rate of return (IRR) or money-weighted returns are more appropriate.

Worked examples

Example 1: A company’s revenue grows from 10,000,000 to 16,105,100 over five years. The overall growth multiple is 16,105,100 divided by 10,000,000, or about 1.61051. The compound annual growth rate is then (1.61051 ^ (1 / 5)) − 1, which is approximately 10 percent per year.

Example 2: An investment increases from 25,000 to 40,000 over three years. The growth multiple is 40,000 divided by 25,000, or 1.6. The CAGR is (1.6 ^ (1 / 3)) − 1, which is about 16.96 percent per year. Even if the year-to-year returns were uneven, this single figure summarizes the average annual growth over the full period.

Example 3: A subscription service grows its user base from 5,000 customers to 8,000 customers in four years. The growth multiple is 8,000 divided by 5,000, or 1.6. The CAGR is (1.6 ^ (1 / 4)) − 1, roughly 12.47 percent per year, which can be compared directly with the growth rates of competitors or market benchmarks.

Key takeaways

This compound annual growth rate calculator implements the standard geometric CAGR formula to translate a beginning value, ending value, and time horizon into a single annualized growth rate.

The tool is designed for professional use in corporate finance, market analysis, and investment reporting, with clear assumptions, transparent methodology, and references to authoritative educational and regulatory sources.

Use CAGR as a clean, comparable measure of long-term growth alongside other metrics such as volatility, drawdowns, and risk-adjusted performance rather than as a standalone decision rule.

Further resources

Expert Q&A

What does compound annual growth rate (CAGR) actually tell me?

CAGR tells you the constant annual rate at which a value would have had to grow to move from its beginning value to its ending value over a given time period, assuming that all gains were reinvested. It is a smoothed, geometric measure that filters out the noise of year-to-year fluctuations and is widely used to compare the long-term performance of companies, portfolios, and markets.

How is CAGR different from average annual return or arithmetic mean?

An arithmetic average return adds up individual period returns and divides by the number of periods, which can overstate long-term performance when returns are volatile. CAGR uses compounding and the geometric mean instead. It looks only at the beginning value, ending value, and time, and returns the single annual rate that exactly links those two points. For long, volatile series, CAGR is generally considered a more realistic summary of growth than a simple average.

When should I use CAGR instead of internal rate of return (IRR or XIRR)?

Use CAGR when you have one initial value and one final value over a defined time horizon and there are no additional contributions or withdrawals in between, for example when analyzing revenue growth, tuition trends, subscriber counts, or an investment bought once and held. Use IRR or XIRR when there are irregular cash flows, such as recurring contributions, withdrawals, or distributions, because those methods account for the timing and size of each cash flow.

Can CAGR be negative?

Yes. If the ending value is lower than the beginning value, the ratio of ending to beginning is less than one and the CAGR will be negative. A negative CAGR represents an average annual shrinkage rate rather than growth. In practice, it is still interpreted as the smoothed year-over-year percentage change over the period.

What happens if the beginning value is zero or changes sign?

If the beginning value is zero, the ratio of ending value to beginning value is undefined, so CAGR cannot be calculated. If values change sign, for example from negative to positive, the standard CAGR formula may no longer be meaningful. In those cases, analysts usually avoid reporting CAGR and instead use other measures, such as describing absolute changes, using index-style rebasing, or applying internal rate of return for cash-flow-based analysis.

Does a higher CAGR always mean a better investment or project?

Not necessarily. A higher CAGR indicates stronger historical growth over the period, but it says nothing about volatility, risk, liquidity, or diversification. Two investments can have the same CAGR but very different risk profiles. Past CAGR also does not guarantee future returns, so it should be interpreted together with risk measures, fundamental analysis, and the context of the asset or project.

Can I use CAGR for periods shorter than one year or for non-annual data?

Yes. Although CAGR is most often quoted on an annual basis, the formula is flexible. If your time period is measured in quarters or months, you can convert it to years or treat the number of periods as a fractional number of years. The calculator will still compute the equivalent annualized growth rate as long as you enter the correct time horizon.

How many years of data do I need for CAGR to be meaningful?

There is no fixed rule, but CAGR becomes more informative as the time period lengthens. Over very short horizons, such as less than one year, the annualized rate can be dominated by short-term noise. Many practitioners prefer to look at multi-year CAGRs, for example three, five, or ten years, to get a more robust view of long-term growth.

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