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CAGR calculator (compound annual growth rate)
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Find the constant yearly growth rate that turns a starting value into an ending value over a given period. Use it to compare investments, revenue or prices measured over different lengths of time.
CAGR calculator
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How CAGR is calculated
CAGR is the constant yearly rate that would grow the starting value into the ending value over the period: CAGR = (ending value ÷ starting value)^(1 ÷ years) − 1. It is a geometric average, so it accounts for compounding, unlike the total return divided by the number of years.
Example: an investment that grows from 1,000 to 2,000 in 5 years has a total return of 100% but a CAGR of about 14.87%, because 1.1487 raised to the power of 5 is about 2. Dividing 100% by 5 would overstate the yearly rate at 20%.
The period can include a fraction of a year, such as 2.5. If the ending value is 0, the CAGR is −100%. The starting value must be greater than 0, and the formula is not meaningful when the values change sign.
CAGR describes past or assumed growth as a single smooth rate. Actual year-by-year returns usually vary, and two investments with the same CAGR can carry very different risk.
Frequently asked questions
What is the difference between CAGR and the average annual return?
The average annual return is the arithmetic mean of yearly returns, while CAGR is the geometric rate that links the starting and ending values. With volatile returns the arithmetic average is higher: a 50% gain followed by a 50% loss averages 0% but leaves 75% of the starting value, a CAGR of about −13.4%.
Can CAGR be negative?
Yes. If the ending value is below the starting value, CAGR is negative. A fall from 1,000 to 500 over 2 years is a CAGR of about −29.29% a year.
How do I calculate CAGR in a spreadsheet?
Use =(ending/starting)^(1/years)-1 and format the cell as a percentage. For 1,000 growing to 2,000 over 5 years, =(2000/1000)^(1/5)-1 returns about 14.87%.