Compound Annual Growth Rate (CAGR) Calculator
Find the steady annual growth rate that smooths a beginning value into an ending value.
These calculators are for informational purposes only and do not constitute financial, legal, or tax advice.
The CAGR Calculator above finds the compound annual growth rate — the single, steady annual percentage that would carry a starting value to an ending value over a set number of years. It’s one of the most widely used ways to measure and compare investment or business performance, precisely because it smooths out the bumps of individual years into one clean, comparable number.
To use it, you just need three numbers: what you started with, what you ended with, and how many years passed in between. The calculator does the rest, returning an annualized growth rate you can use to compare a stock, a business, a savings account, or almost any value that changes over time. As a free, no-signup CAGR calculator online, it works equally well as an annualized return calculator for a single stock or a broader CAGR growth calculator for comparing multiple investments side by side.
CAGR (compound annual growth rate) is the steady annual rate that would grow a beginning value into an ending value over a stated number of years, assuming smooth compounding the whole way. It’s calculated as (Ending Value ÷ Beginning Value) raised to the power of 1 divided by the number of years, minus 1 — and it’s a cleaner way to compare growth than simply averaging each year’s return.
How to Use the CAGR Calculator
Getting a result takes just a few inputs:
What Is CAGR?
CAGR stands for compound annual growth rate. It measures how much an investment, business metric, or any other value grew, on average, each year over a multi-year period — assuming that growth compounded steadily rather than happening in one lump sum.
CAGR is useful because real-world growth is rarely a straight line. A stock might rise 25% one year and fall 10% the next; a company’s revenue might jump sharply after a new product launch and then plateau. CAGR takes all of that unevenness and reduces it to a single annualized number, which makes it far easier to compare two different investments, two different companies, or the same investment across two different time periods.
This is also what separates CAGR from a simple average annual return. A simple average just adds up each year’s percentage return and divides by the number of years — which can produce a misleading answer when returns are volatile, as shown later in this guide. CAGR instead works backward from the actual beginning and ending values, so it reflects the real compounding effect of growth over time.
CAGR shows up constantly in investing and business analysis: comparing mutual funds or stocks over a 5- or 10-year period, evaluating a company’s revenue or customer growth, tracking real estate appreciation, or measuring how a retirement portfolio has grown since it was opened. Whether you’re using a dedicated compound annual growth rate calculator or working the formula by hand, the goal is always the same — turning a messy, multi-year growth story into one clear, comparable percentage.
CAGR Formula
Knowing how to calculate CAGR by hand is straightforward once you see the formula laid out. The standard compound annual growth rate formula is:
Each part of the formula plays a specific role:
- Beginning Value — the starting amount of the investment or metric
- Ending Value — the final amount at the end of the period being measured
- Number of Years — the total length of the period between the beginning and ending values
- CAGR — the resulting annualized growth rate, expressed as a percentage
Getting the beginning value CAGR input right matters just as much as the ending value CAGR input — both need to reflect the same asset or metric, measured consistently, or the result won’t be meaningful. Once you’re ready to calculate compound annual growth rate for your own numbers, plug them into the fields above.
Here’s a simple worked example: an investment grows from $10,000 to $15,000 over 5 years.
CAGR = (1.5)^0.2 − 1
CAGR ≈ 1.0845 − 1
CAGR ≈ 0.0845, or 8.45%
So an investment that grew from $10,000 to $15,000 over 5 years had a compound annual growth rate of approximately 8.45% — meaning it grew, on average, by about 8.45% each year to reach that final value.
CAGR Calculation Example
Illustrative example using realistic U.S. dollar amounts.
| Beginning Investment | $10,000 |
| Ending Investment | $20,000 |
| Investment Period | 10 years |
Step by step:
CAGR = (2.0)^0.1 − 1
CAGR ≈ 1.0718 − 1
CAGR ≈ 0.0718, or 7.18%
This investment doubled in value over 10 years, which works out to a compound annual growth rate of approximately 7.18% per year — a helpful reminder that “doubling your money” over a decade doesn’t require an extraordinarily high annual rate once compounding is factored in.
What Does CAGR Tell You?
As a CAGR percentage calculator, the result you get back tells you the direction and pace of growth, smoothed into one annualized figure:
Important: CAGR is a smoothed, annualized average — it does not mean the investment actually grew by that exact percentage every single year. The real path could have included much bigger gains in some years and losses in others, as long as they net out to the same overall result.
CAGR vs. Average Annual Return
These two metrics sound similar but can produce very different answers, especially when returns are volatile.
| CAGR | Average Annual Return | |
|---|---|---|
| Definition | Annualized rate implied by the actual beginning and ending values | Simple mean of each year’s individual return |
| Calculation Method | Geometric — works backward from start/end values | Arithmetic — adds returns and divides by count |
| Compounding | Accounts for compounding automatically | Does not account for compounding |
| Volatility Consideration | Reflects real path-independent outcome | Can overstate returns when volatility is high |
| Best Use Case | Comparing actual growth across investments or periods | Quick, rough sense of typical yearly performance |
| Example | +100% then -50% → CAGR = 0% | +100% then -50% → average = 25% |
That last row is the clearest illustration: $10,000 that gains 100% in Year 1 (to $20,000) and then loses 50% in Year 2 (back to $10,000) has grown by exactly $0 over two years — a 0% CAGR. But the simple average of +100% and -50% is +25%, which wildly overstates what actually happened. This is precisely why CAGR is generally the more trustworthy metric when comparing investment performance across multiple years.
CAGR vs. ROI
ROI (return on investment) and CAGR are both growth measures, but they answer different questions. ROI measures the total gain or loss over the entire period relative to the initial investment, without regard to how long that took. CAGR annualizes that growth into a per-year rate, which makes it possible to compare investments held for different lengths of time.
| CAGR | ROI | |
|---|---|---|
| What It Measures | Annualized growth rate over time | Total gain or loss over the whole period |
| Time Factored In | Yes — explicitly annualized | No — a single lump-sum figure |
| Good For | Comparing investments held for different lengths of time | Understanding total profit or loss on a single investment |
| Example ($10,000 → $15,000, 5 yrs) | 8.45% per year | 50% total |
Using the same $10,000-to-$15,000 example from earlier, the total ROI is a straightforward 50% ($5,000 gain ÷ $10,000 invested) — but that 50% figure alone doesn’t tell you whether it happened over 2 years or 20. CAGR fills that gap by expressing the same growth as approximately 8.45% per year, making it far more useful for comparing two investments with different holding periods.
When Should You Use CAGR?
CAGR is a versatile metric that applies well beyond just stock returns:
- Comparing investment performance across different funds or accounts
- Measuring how a portfolio has grown since inception
- Comparing two or more stock investments over the same period
- Evaluating a business’s revenue growth year over year
- Measuring sales growth for a product line or company
- Comparing overall market or sector growth over time
- Analyzing long-term savings or retirement account growth
- Comparing investments held for different lengths of time on an apples-to-apples basis
CAGR Example for Investments
Illustrative example only — not a projection of future returns.
An investor starts with $25,000, and the investment grows to $40,000 over 7 years.
CAGR = (1.6)^(1/7) − 1
CAGR ≈ 1.0694 − 1
CAGR ≈ 0.0694, or 6.94%
This investment grew at a compound annual rate of about 6.94% over the 7-year period. That figure reflects the overall growth actually achieved — it says nothing about whether future years will produce a similar rate, since past growth, however it was calculated, is never a guarantee of what comes next. This is exactly the kind of scenario an investment CAGR calculator (or, described another way, a CAGR investment calculator) is built to handle — turning a real-world start and end value into one comparable growth figure.
CAGR for Business Growth
Businesses use CAGR the same way investors do, just applied to different metrics: revenue, sales volume, customer count, profit, market size, or total assets. Because CAGR annualizes growth, it lets a company or analyst compare growth trends across different business lines or against competitors, even when the underlying numbers vary widely in scale.
Example: a company’s annual revenue grows from $2 million to $5 million over 8 years.
CAGR = (2.5)^(1/8) − 1
CAGR ≈ 1.1214 − 1
CAGR ≈ 0.1214, or 12.14%
This company’s revenue grew at a compound annual rate of about 12.14% over 8 years — a useful, single figure that could be compared against industry benchmarks or the company’s own growth in earlier periods.
CAGR Limitations
CAGR is a genuinely useful metric, but it’s important to understand what it doesn’t capture:
- It assumes a smooth, steady annualized growth rate that likely didn’t actually occur every single year
- It doesn’t show year-to-year volatility or how bumpy the ride actually was
- It doesn’t capture the specific path an investment took to get from start to finish
- It doesn’t account for cash flows — deposits or withdrawals — made during the period
- It does not represent a guaranteed future return of any kind
- It can be misleading when comparing investments with very different risk levels
- On its own, it does not measure investment risk
CAGR and Volatility
Two investments can share the exact same CAGR while having gone through completely different experiences along the way. Consider two hypothetical $10,000 investments that both end up at $15,000 after 5 years — an identical 8.45% CAGR for each:
| Year | Stable Path | Volatile Path |
|---|---|---|
| Start | $10,000 | $10,000 |
| Year 1 | $10,845 | $13,000 |
| Year 2 | $11,761 | $11,700 |
| Year 3 | $12,754 | $14,040 |
| Year 4 | $13,832 | $11,934 |
| Year 5 (End) | $15,000 | $15,000 |
The stable path grew by a steady ~8.45% every year. The volatile path bounced between +30%, -10%, +20%, -15%, and +25.69%, yet arrived at the exact same $15,000 ending value — and therefore the exact same 8.45% CAGR. An investor who lived through the volatile path experienced a very different (and riskier) journey than the CAGR figure alone would suggest, which is why CAGR should be considered alongside volatility, drawdowns, and other risk metrics rather than in isolation.
CAGR With Additional Contributions
The standard CAGR formula only looks at a single beginning value and a single ending value — it doesn’t account for money added or withdrawn along the way. If you’re regularly contributing to an investment account (like a 401(k) or a brokerage account you add to every month), a plain CAGR calculation on the account’s total balance won’t accurately reflect your personal annualized return, since part of the ending balance simply reflects new money you put in, not investment growth.
In cases where contributions or withdrawals happen during the period, metrics like the Internal Rate of Return (IRR) or a money-weighted return are generally more appropriate, since they’re designed to account for the timing and size of each cash flow. CAGR remains the right tool when you’re measuring the growth of a fixed starting amount with no additional deposits or withdrawals along the way.
Frequently Asked Questions
What is CAGR?
How do I calculate CAGR?
What is a good CAGR?
Is CAGR the same as annual return?
What is the difference between CAGR and ROI?
Can CAGR be negative?
Can CAGR be more than 100%?
Does CAGR account for dividends?
Does CAGR account for inflation?
Can CAGR be used for business revenue?
Can I use CAGR for stock investments?
What happens if the ending value is lower than the beginning value?
Can CAGR be used for periods shorter than one year?
Key Takeaways
- CAGR measures the smoothed, annualized growth rate between a beginning value and an ending value over a set number of years
- It requires just three inputs: beginning value, ending value, and number of years
- The resulting percentage represents an average annualized rate, not the actual return earned in every individual year
- CAGR is especially useful for comparing investments, businesses, or time periods on a consistent, apples-to-apples basis
- CAGR does not show year-to-year volatility, so two very different investment journeys can produce the identical CAGR
- Investments with regular contributions or withdrawals need a different metric, like IRR, to accurately reflect personal returns
- CAGR is best used alongside risk, volatility, and other performance metrics — not as the sole measure of an investment’s quality
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This calculator and the examples on this page are provided for educational and informational purposes only and do not constitute investment, tax, or financial advice. Past growth rates, including any CAGR calculated from historical values, do not guarantee or predict future performance. Consult a qualified financial professional before making investment decisions.