CAGR Calculator (Compound Annual Growth Rate)
Calculate the smoothed annual growth rate between two values, and project it forward.
Formula
CAGR = (ending / beginning)^(1/years) − 1
Tips
- CAGR smooths away all volatility. Two businesses with identical CAGR can have wildly different year-to-year records, and one may be far riskier.
- It is meaningless over very short periods, and easily manipulated by choosing a flattering start year.
- The rule of 72 is a decent mental check: 72 ÷ growth rate ≈ years to double.
Frequently asked questions
Why not just average the yearly growth rates?
The arithmetic mean overstates growth. Rising 50% then falling 50% averages to zero, but leaves you 25% down. CAGR is the geometric mean and reflects what actually happened.