CAGR Calculator
Calculate your Compound Annual Growth Rate over multiple years.
CAGR Calculator
The CAGR Calculator is a professional financial tool that allows you to measure the Compound Annual Growth Rate of an investment, business, or portfolio over a specific period of time. It provides a clear and accurate picture of your average yearly growth by smoothing out fluctuations and showing how much your money grew each year on average. Whether you’re analyzing stocks, mutual funds, or company revenue, this calculator helps you make data-driven decisions about performance and long-term trends.
By using the CAGR Calculator, investors and business owners can evaluate profitability, compare investment options, and determine whether their returns are sustainable over time. It eliminates confusion caused by irregular year-to-year changes and focuses on steady compounded growth.
With the CAGR Calculator, you can instantly measure consistent annualized returns and compare them across multiple investments or time periods, saving time and improving accuracy.
What Is CAGR (Compound Annual Growth Rate)?
Compound Annual Growth Rate (CAGR) is a financial metric that shows the mean annual growth rate of an investment assuming profits are reinvested each year. It’s often referred to as the “smoothed” annual rate of return because it represents how much your investment would have grown if it had increased at a constant rate every year.
For example, if your portfolio was worth $10,000 five years ago and is worth $16,105 today, your CAGR is 10% per year. This doesn’t mean you earned 10% every year, but rather that your average annual compounded return was equivalent to 10% per year over that period.
CAGR Formula
The basic formula for CAGR is:
CAGR = (Ending Value / Beginning Value) ^ (1 / Number of Years) − 1
To express the result as a percentage, multiply it by 100. This formula can be applied to investments, revenues, market size, or any time-based growth metric.
Example Calculation
Suppose you invested $5,000, and after 4 years, the value grew to $7,500.
Applying the formula:
CAGR = (7,500 / 5,000)^(1/4) − 1 = 0.1087 → 10.87%This means your investment grew at an average annual rate of 10.87% per year for 4 years. Even if some years performed better and others worse, CAGR shows the “average” growth per year.
How to Use the CAGR Calculator
- Enter the starting value of your investment (initial amount).
- Enter the ending value (current or final balance).
- Enter the number of years the investment lasted.
- Click “Calculate” to instantly view your annual growth rate.
The CAGR Calculator automatically applies the compound growth formula and returns the percentage rate of return per year. It’s ideal for quick analysis and long-term planning.
The CAGR Calculator makes complex financial analysis simple — it gives you immediate insights into how efficiently your capital has grown year after year.
Why CAGR Is Important
CAGR is one of the most reliable methods for analyzing long-term investment or business growth. It removes the “noise” of yearly volatility and focuses on consistent performance. Financial professionals, economists, and investors prefer CAGR because it gives a normalized growth rate that can easily be compared across different assets or time periods.
- Investors use it to compare returns from different portfolios or funds.
- Businesses use it to evaluate long-term revenue, profit, or market share growth.
- Economists use CAGR to track GDP, inflation, or sector expansion.
Applications of the CAGR Calculator
1. Investment Growth Analysis
Fluctuating annual returns can make performance appear misleading. The CAGR Calculator provides a simplified way to measure growth as if your investment grew at a constant rate every year. For example, a stock increasing from $1,000 to $2,000 in 3 years has a CAGR of 26%, even if one year gained 50% and another lost 10%.
2. Business Performance Measurement
Companies use CAGR to report consistent growth metrics in financial statements. For example, if a company’s revenue increased from $2 million to $4.5 million over 5 years, the CAGR would be:
CAGR = (4.5 / 2)^(1/5) − 1 = 17.46%This makes it easier for investors and stakeholders to evaluate sustainable performance instead of focusing on fluctuating yearly results.
3. Economic and Market Trends
CAGR is widely used by analysts to understand GDP growth, inflation rates, or market sector performance. For example, if the global renewable energy market grows from $800 billion to $1.6 trillion in 7 years, the CAGR is about 10.4%.
4. Personal Finance and Savings
You can apply CAGR to your savings, retirement funds, or investment portfolios to measure how efficiently they grow over time. For instance, combining it with the Compound Interest Calculator gives you a clear view of both annual growth and total future value.
CAGR vs Average Annual Growth Rate (AAGR)
Although both measure growth over time, CAGR and AAGR differ fundamentally. AAGR takes a simple arithmetic average of yearly growth rates, while CAGR accounts for compounding — meaning each year’s growth builds upon the previous year’s total. Therefore, CAGR gives a more accurate representation of true investment performance.
CAGR vs ROI vs IRR
It’s easy to confuse CAGR with other financial metrics. Here’s the distinction:
- ROI (Return on Investment): Measures total return over a period, without showing annualized growth. See the ROI Calculator.
- CAGR: Annualizes ROI to show the consistent yearly rate.
- IRR (Internal Rate of Return): Accounts for irregular cash flows — useful for real estate or complex investments.
For long-term investments with regular growth, the CAGR Calculator is easier to use and interpret.
Advantages of Using the CAGR Calculator
- Eliminates volatility in annual data.
- Provides a consistent growth rate for multi-year analysis.
- Ideal for comparing performance across investments or markets.
- Simple and fast to calculate.
- Helps visualize compounding effects over time.
Limitations of CAGR
- Assumes a constant growth rate, which may not reflect real-world fluctuations.
- Doesn’t show volatility or yearly ups and downs.
- Not ideal for short-term or highly volatile investments.
Practical Examples
Example 1 – Mutual Fund Growth
You invested $20,000 in a mutual fund. After 6 years, it grew to $36,000.
CAGR = (36,000 / 20,000)^(1/6) − 1 = 10.67%Your investment achieved an average annual growth of 10.67%.
Example 2 – Company Revenue
A startup grows its revenue from $500,000 to $1.2 million in 4 years:
CAGR = (1.2 / 0.5)^(1/4) − 1 = 23.5%This means the company’s revenue increased by 23.5% annually on average, a strong indicator of sustainable growth.
Example 3 – Market Expansion
A technology market grows from $1 billion to $3 billion in 8 years:
CAGR = (3 / 1)^(1/8) − 1 = 14.7%How CAGR Helps Investors
- Compares the performance of different assets objectively.
- Identifies underperforming investments.
- Assists in long-term financial planning and projections.
- Provides clarity in portfolio analysis.
For accurate future value projections, pair the CAGR Calculator with tools like the Investment Return Calculator and Compound Interest Calculator.
How to Interpret CAGR Results
A high CAGR indicates strong, consistent performance. For example, a CAGR above 12% in equity investments is excellent, while 6–8% is considered steady. In contrast, low or negative CAGR indicates stagnation or decline, signaling the need to reassess your investment strategy.
CAGR in Business and Economics
Businesses use CAGR in investor reports, annual statements, and strategic planning documents. Economists rely on CAGR to understand GDP, export growth, or inflation trends. For example, if a country’s GDP increases from $1 trillion to $1.8 trillion in 10 years, the CAGR is 6.1% — showing stable economic progress.
Related Tools and Calculators
- ROI Calculator
- Compound Interest Calculator
- Investment Return Calculator
- Percentage Change Calculator