Compound Annual Growth Rate Calculator

What Is a Compound Annual Growth Rate Calculator?

A compound annual growth rate calculator determines the annualised rate at which a value would need to grow to reach a specified ending value from a specified beginning value over a set period. CAGR is commonly used for analysing investments, revenue, sales, market size, assets, customer numbers and other business metrics.

Unlike a simple percentage increase, CAGR accounts for compounding over the entire period. Enter the beginning value, ending value and number of years into the calculator to obtain the annualised growth rate as a percentage.

Why Use a Compound Annual Growth Rate Calculator?

CAGR provides a convenient way to express growth over multiple years as a single annualised percentage. This can make growth rates easier to compare across different periods, investments or business metrics.

How to Use the Compound Annual Growth Rate Calculator

Enter the values and period you want to analyse. The calculator then determines the compound annual growth rate automatically.

1. Enter the beginning value — Enter the value at the start of the period.
2. Enter the ending value — Enter the value at the end of the period.
3. Enter the number of years — Enter the length of the period in years. Decimal values can be used for periods that are shorter or longer than a whole number of years.
4. Calculate CAGR — Select the Calculate CAGR button to display the annualised growth rate and related results.

How to Calculate Compound Annual Growth Rate

Compound annual growth rate, commonly abbreviated to CAGR, measures the constant annual growth rate that would turn a beginning value into an ending value over a specified period. It is expressed as a percentage and incorporates the effect of compounding.

The standard CAGR formula is CAGR = (Ending Value ÷ Beginning Value)^{1 ÷ Number of Years} − 1. After calculating the result, multiply it by 100 to express the rate as a percentage.

CAGR Example

For example, if a business increases its revenue from £100,000 to £150,000 over five years, the CAGR represents the constant annual compounded growth rate that would produce the same overall increase. The actual revenue may have increased by different amounts in individual years, but CAGR expresses the overall change as one annualised rate.

CAGR vs. Total Growth

Total growth and CAGR measure different aspects of change. Total growth shows how much a value changed across the entire period, while CAGR converts that overall change into an equivalent annual compounded rate. A value can therefore have substantial total growth while having a comparatively modest CAGR when the growth occurs over many years.

Understanding CAGR Results

A positive CAGR means the ending value is higher than the beginning value. A negative CAGR means the ending value is lower. A CAGR of 0% means the beginning and ending values are the same.

CAGR is an annualised calculation rather than a record of actual yearly performance. It assumes a constant compounded rate for calculation purposes, so it should not be interpreted as evidence that the value actually increased by the same percentage every year.

Frequently Asked Questions