# CAGR Calculator

Use this online CAGR calculator to easily calculate the Compound annual growth rate of an investment or a business metric of interest. The compound growth calculator can be used for compounding growth over any period (daily, weekly, monthly).

## Using the CAGR calculator

Our **CAGR calculator** is a simple and easy to use tool to calculate the average rate of growth of an asset. For the Initial value enter the value of the investment you made or the business revenue in the beginning of the time period of interest. In the "Final value" field enter either the current value of the investment or current business revenue, or enter the final value of the asset at the end of the period of interest. Finally, enter the number of periods over which the value has grown.

Once these are filled, press "Calculate" to see the present value and the compound growth rate (annual if you entered years as periods, other otherwise).

## What is CAGR?

CAGR is the average compound annual growth rate of an asset, investment, business results such as sales, revenue, clients, users, units produced or delivered, etc.. When calculated for a period different than a year it can be the quarterly, monthly, weekly, etc. growth rate. It is useful in comparing growth rates across different data sets of a common domain, e.g. revenue growth of companies in a particular industry or company divisions with the same enterprise.

CAGR is often reported in investment funds results, to compare and demonstrate the performance of investment advisors, historical returns of stock with bonds or with a saving account, as well as communicating the rate of increase or decrease of business metrics such as sales, costs, market share, customer satisfaction, etc. You can read about CAGR in more detail in our extensive article Compound Annual Growth Rate (CAGR) which covers it from many different angles.

## Compound annual growth rate (CAGR) formula

So, how to calculate CAGR? You can do it by yourself or using an Excel spreadsheet by using the formula:

where **V(t _{0})** is the initial value,

**V(t**is the final value and

_{n})**t**is the number of time periods over which the growth has been realized (years, months, etc.). For example, if a business had an year-end revenue of 10,000,000 in 2010 and 25,000,000 in 2018, the compound annual growth rate is CAGR(0,8) = (25000000 / 10000000)

_{n}- t_{0}^{1/8}= 12.135%. Although the name suggests it should be calculated for whole years, the same formula can be used for calculating monthly, weekly or daily growth rates. Of course, our CAGR calculator greatly simplifies the process.

The CAGR calculation is practically the geometric mean of the growth over the number of periods of interest. This is the correct way to calculate average growth. In contrast, if one is using the arithmetic mean they would get an incorrect result (usually higher) since the average of ratios is not the arithmetic average.

##

Compound growth calculation example

Above is an example with a single calculation. Now let us explore what happens with different financial parameters in play. Assume a $10,000 investment was made five years ago and one wants to know what the compound annual growth rate was over those five years. The answer for several different final value scenarios is in the CAGR column of the table below.

Initial Value | Final Value | Number of Years | CAGR |
---|---|---|---|

$10,000 | $12,000 | 5 | 3.714% |

$10,000 | $14,000 | 5 | 6.961% |

$10,000 | $16,000 | 5 | 9.856% |

$10,000 | $18,000 | 5 | 12.475% |

$10,000 | $20,000 | 5 | 14.870% |

The compound growth of the investment on an annual basis increases parallel to the increase in the expected (or observed) final value, assuming the number of years is fixed.

Now let us take a look at another example in which we get the same final value as the last row of the above table, and see how the time it takes to achieve it reflects on the average growth rate.

Initial Value | Final Value | Number of Years | CAGR |
---|---|---|---|

$10,000 | $20,000 | 2 | 41.421% |

$10,000 | $20,000 | 5 | 14.870% |

$10,000 | $20,000 | 8 | 9.051% |

$10,000 | $20,000 | 10 | 7.177% |

The time value of money becomes obvious as the longer it takes to make the same absolute return, the less the growth rate of the investment is. This inverse relationship reflects the time preference inherent in all economic actions.

## Financial caution

This is a simple online software which is a good starting point in estimating the compound annual growth rate for any investment, but is by no means the end of such a process. You should always consult a qualified professional when making important financial decisions and long-term agreements, such as long-term bank deposits. Use the information provided by the tool critically and at your own risk.

#### Cite this calculator & page

If you'd like to cite this online calculator resource and information as provided on the page, you can use the following citation:

Georgiev G.Z., *"CAGR Calculator"*, [online] Available at: https://www.gigacalculator.com/calculators/cagr-calculator.php URL [Accessed Date: 02 Dec, 2020].