Compound Annual Growth Rate (CAGR) Calculator

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CAGR

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What is CAGR Calculator?

The compound annual growth rate calculator turns a starting value, ending value and elapsed period into an equivalent constant growth rate. If revenue rises from 100,000 to 121,000 over two years, CAGR asks which steady annual rate would produce that same beginning-to-end change through compounding.

The answer summarizes the endpoints; it does not describe the path between them. A business with uneven annual results can have the same CAGR as one growing steadily. This page also has no fields for deposits, withdrawals or intermediate cash flows, so an investment account receiving new contributions cannot be assessed correctly by treating its entire balance increase as investment return.

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How to Use This Calculator

  1. Choose a consistent measure for the starting and ending values, such as annual revenue, a customer count or a portfolio value without external cash flows. Keep currency and scale identical.
  2. Enter Number of periods as the elapsed time between the two observations. Use years to obtain an annual rate. Five year-end observations spanning 2020 to 2024 cover four annual intervals, rather than five.
  3. Enter Initial value and Final value. For an ordinary growth-rate interpretation, use a positive starting value and positive ending value; zero or sign-changing amounts need different analysis.
  4. Choose Calculate to read the percentage, rounded to two decimal places. The currency selection is a label and does not exchange one currency into another.
  5. Check the result by multiplying the initial value by (1 + rate as a decimal) raised to the period count. Use the unrounded rate when an exact endpoint reconciliation is needed.
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Formula Used

CAGR = [(final value/initial value)^(1/n) − 1] × 100%. Equivalently, final value = initial value × (1 + CAGR/100)^n.
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Variables Explained

ItemMeaning
Initial valueThe baseline at the beginning of the interval. It is the denominator, so zero cannot be used in the standard formula.
Final valueThe comparable value at the end of the interval. Changes in accounting definition, currency or included business units can undermine the comparison.
Number of periods nThe number of equal time intervals between the values. The rate is per interval; an annual label is appropriate only when those intervals are years.
CAGRThe constant compounded rate that reproduces the endpoint ratio. It is not the arithmetic average of observed annual percentage changes.
Currency selectorsLabels for the amounts. Convert amounts to one common currency before calculation if the source figures use different currencies.
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Worked Example

An initial value of 1000 grows to 1210 in two years. The ratio is 1210/1000 = 1.21. Its square root is 1.10, so CAGR = (1.10 − 1) × 100 = 10%. Checking the answer gives 1000 × 1.10 × 1.10 = 1210.

If the value instead declines from 1000 to 810 over two years, the ratio is 0.81 and its square root is 0.90. CAGR is −10%. A negative result represents a compounded decline over the specified intervals.

Consider a value that rises from 100 to 150 in the first year and returns to 100 in the second. The annual changes are +50% and about −33.33%, but the two-year CAGR is zero because the endpoints match. Averaging the two annual percentages would give a misleading positive number.

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Why Use This Calculator?

CAGR is useful for putting changes over different time spans onto a common compounded basis. It can support a comparison of revenue trends or a no-cash-flow investment value, provided the underlying measurements are comparable. It does not account for risk, volatility, tax, fees, inflation or changes in business composition unless those are already reflected in the values supplied.

The period unit matters. Entering 24 for a two-year interval produces a per-month rate if the 24 periods mean months. That rate is not automatically annual because the page name contains annual. To annualize a monthly compounded rate, use the appropriate compounding relationship rather than multiplying blindly by 12.

A historical CAGR is also not a forecast. It compresses past endpoints into one number and cannot establish that future growth will follow the same path. When interpreting business results, review the actual annual values and any one-time events alongside this summary.

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Common Mistakes

    • Do not divide the total percentage change by years and call it CAGR; that ignores compounding.
    • Do not count observation dates instead of the intervals between them.
    • Do not treat fresh deposits into an account as investment growth. Cash-flow timing requires an appropriate return method.
    • Do not enter one amount in thousands and the other in full units. The ratio would be changed by a factor unrelated to growth.
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Frequently Asked Questions

Can CAGR be negative?

Yes. If a positive ending value is below the positive starting value, the compounded rate is negative. For example, a two-year change from 100 to 64 has a CAGR of −20%, since 100 × 0.8² = 64.

Does CAGR show how volatile the results were?

No. It uses only the beginning, ending and period count. Very different intermediate paths can share the same CAGR. Inspect the underlying series when variation, drawdowns or operating instability matter.

What if the starting value is zero?

The standard formula divides by the initial value and is undefined at zero. Report the absolute change or use an analysis appropriate to a new or zero-baseline activity rather than forcing an arbitrary growth percentage.

Can I use it for a period shorter than a year?

A fractional year can express an elapsed annual interval, but annualizing a short-period change can produce an exaggerated impression if treated as a forecast. State the actual measurement dates and distinguish the annualized calculation from an observed full-year result.

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Sources & References

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