CAGR Calculator

CAGR is the constant annual growth rate that would have taken a starting value to its ending value over a given number of years. It smooths bumpy returns into a single comparable rate.

The CAGR formula

CAGR = (Ending / Beginning)^1/n − 1

Where n is the number of years between the two values. CAGR ignores the path: a stock that triples then halves over five years has a different CAGR than one that grows steadily, even if both end at the same point. That smoothing is exactly what makes CAGR useful for comparison and misleading for risk assessment.

Why CAGR ≠ average annual growth

If a stock returns +50% in year one and −33% in year two, the arithmetic mean is +8.5%. The actual CAGR is 0% — the stock is back where it started. Compounding makes the geometric mean (CAGR) the correct figure for any multi-period analysis. The arithmetic average overstates returns whenever there's variance.

Worked example

A company's revenue went from $4.2M in 2019 to $12.8M in 2024 — five years of growth. CAGR = (12.8 / 4.2)^1/5 − 1 = 24.9%. Even though some years grew faster (and some slower), 24.9% compounded annually for five years would have produced the same result.

How CAGR can mislead

Cherry-picked endpoints. A 10-year CAGR starting at a market low looks dramatically better than one starting six months earlier. Always note the period.
No path information. CAGR doesn't tell you about volatility, drawdowns, or the order of returns. Two investments with identical CAGRs can have very different risk profiles.
Fragile in short windows. Computing CAGR over two or three years magnifies the influence of single-year outliers, especially recent ones.
Misapplied to non-compounding flows. Use CAGR for stocks of value (revenue, AUM, customer count). Don't apply it to flow series like "monthly active users" without first averaging.

Relationship to other metrics

For two-cash-flow problems, CAGR is identical to annualized ROI. For multi-period cash flow streams, the analogous metric is IRR. The Rule of 72 approximates the years to double at a given CAGR by dividing 72 by the rate as a percentage.