CAGR Calculator
Calculate the Compound Annual Growth Rate for any investment or business metric. Enter a beginning value, ending value, and the number of years to get CAGR, total growth percentage, and growth multiple.
Educational tool only. CAGR describes historical growth over a specific period. It does not predict future returns and does not account for taxes, fees, or inflation. This calculator does not constitute financial advice. Consult a qualified financial advisor for investment decisions.
What Is CAGR?
CAGR (Compound Annual Growth Rate) is the rate at which an investment would have grown if it grew at a perfectly steady rate each year. Because investments rarely grow at a constant pace, CAGR smooths out year-to-year volatility into a single comparable figure. It is the standard metric for comparing investment performance across different time periods and asset classes.
The Formula
CAGR = (Ending Value / Beginning Value)^(1 / Years) - 1
Total Growth % = (Ending / Beginning - 1) × 100
Growth Multiple = Ending Value / Beginning Value
Example: $10,000 → $20,000 over 5 years
CAGR = (20,000 / 10,000)^(1/5) - 1
= 2^0.2 - 1
= 1.1487 - 1
= 14.87% per yearCAGR vs Total Return vs Average Return
Total return tells you the overall percentage gain from start to finish. Average annual return (arithmetic mean) adds up each year's return and divides by the number of years. CAGR (geometric mean) accounts for compounding — meaning it reflects the actual year-over-year growth needed to go from the starting value to the ending value.
When an investment has volatile returns, the arithmetic average will always be higher than CAGR. For example, an investment that gains 50% one year and loses 33% the next breaks even (1.5 × 0.67 ≈ 1.0), but the arithmetic average shows +8.5% — a misleading figure. CAGR would correctly show 0%.
FAQ
What is CAGR used for?
CAGR is used to compare investment returns, business revenue growth, and any metric that compounds over time. Investors use it to compare funds with different time horizons. Analysts use it to express company growth rates. It strips out the noise of year-to-year volatility to show the steady-state growth equivalent.
Can CAGR be negative?
Yes. If your ending value is less than your beginning value, CAGR will be negative — representing annual decline. For example, $10,000 shrinking to $7,000 over 5 years produces a CAGR of about -6.9% per year.
Does CAGR account for inflation?
Standard CAGR does not account for inflation — it is a nominal figure. To find real (inflation-adjusted) CAGR, use the inflation-adjusted ending value instead of the nominal ending value, or subtract the inflation rate: Real CAGR ≈ Nominal CAGR − Inflation Rate.
Want the full explanation? Read the CAGR Calculator Guide →