CAGR Calculator: Annualized Growth Rate Formula and Example
Calculate compound annual growth rate from starting value, ending value, and time, and learn what CAGR does and does not show.
Compound Annual Growth Rate (CAGR) describes the smoothed annual growth rate that would take a starting value to an ending value over a chosen period, assuming compounding.
CAGR Formula
CAGR = [(Ending Value ├╖ Starting Value)^(1 ├╖ Years) тИТ 1] ├Ч 100
For example, if an investment grows from тВ╣10,000 to тВ╣15,000 over 4 years, CAGR is approximately 10.67% per year. This is an annualized rate, not a statement that the investment gained exactly 10.67% in each individual year.
How to Use a CAGR Calculator
- Enter the starting value.
- Enter the ending value.
- Enter the number of years between them.
- Calculate the annualized rate and review the result.
Starting value and time must be greater than zero. If the ending value is below the starting value, CAGR can be negative, representing a decline over the period.
Why CAGR Is Useful
CAGR helps compare growth over different periods and makes uneven growth easier to summarize. It is commonly used for business revenue, sales, fund values, and other measures that change over time.
What CAGR Cannot Tell You
CAGR hides the path taken between the two values. Two investments can have the same CAGR but very different volatility and risk. It also does not account automatically for additional contributions, withdrawals, taxes, fees, or inflation.
Practical Tip
Compare CAGR with the full context: the period measured, risk, cash flows, and any costs. Past growth does not guarantee future performance, especially for market-linked investments.
Explore More on Calcusite AI
Use the relevant calculator on Calcusite AI to test different values and compare scenarios. Results are estimates based on the inputs and assumptions you provide.