Return math

CAGR Calculator

Find the compound annual growth rate between any two values: the steady yearly rate that turns your starting amount into your ending amount.

Free calculator

Calculate compound annual growth

Values
Time
yrs

Decimals work: 18 months is 1.5 years.

Compound annual growth rate
+12.47% a year
$10,000.00 growing to $18,000.00 over 5 years.
Total return
+80%
Growth multiple
1.8x
Gain
$8,000.00
Value at a steady 12.5% a year

CAGR smooths the path: real investments rarely grow the same amount every year.

CAGR = (ending value / beginning value)^(1 / years) - 1

How to use the CAGR Calculator

  1. Enter the value at the start, such as what you invested or a company's revenue in the first year.
  2. Enter the value at the end of the period.
  3. Enter the number of years between them. Decimals are fine for partial years.

How the calculation works

CAGR asks what constant yearly growth rate, compounded, links the two values. Taking the nth root of the growth multiple spreads the total change evenly across the years, so periods of different lengths can be compared on the same yearly scale.

Formula

CAGR = (ending value / beginning value)^(1 / years) - 1

Total return = ending value / beginning value - 1

Worked example

$10,000 grows to $18,000 over 5 years. The growth multiple is 1.8, a total return of 80%. The fifth root of 1.8 is about 1.1247, so the CAGR is 12.47% a year.

Compounding at 12.47% turns $10,000 into $11,247 after one year, $12,650 after two, and $18,000 after five.

A stock: a share bought at $25 trades at $60 seven years later. (60 / 25)^(1/7) - 1 gives a price CAGR of 13.32% a year. Use values that include reinvested dividends instead of share prices if you want the investment's total-return CAGR.

A business: revenue grows from $2.0 billion in one fiscal year to $3.5 billion three fiscal years later. That is three years of growth, not four, so (3.5 / 2.0)^(1/3) - 1 gives a revenue CAGR of 20.51% a year.

What the results mean

  • CAGR is the rate that reproduces the start and end values exactly; it says nothing about volatility in between.
  • Two investments with the same CAGR can have had very different drawdowns along the way.
  • A negative CAGR means the value shrank; an ending value of zero is -100%.

Assumptions and limitations

  • One starting amount and no deposits or withdrawals during the period; with cash flows, use a money-weighted return instead.
  • The beginning value must be above zero and the period longer than zero. An ending value of zero gives -100%.
  • Taxes, fees and inflation are not deducted unless they are already reflected in your ending value.
  • Short periods annualize sharply: a 10% gain in 3 months is a CAGR above 46%.

CAGR Calculator FAQ

What is CAGR?

CAGR, the compound annual growth rate, is the single yearly rate that would grow a starting value into an ending value over a period, if growth were steady and compounded each year. It describes the result, not the path: an investment that rose and fell along the way can have the same CAGR as one that grew smoothly.

How do you calculate CAGR?

Divide the ending value by the beginning value, raise the result to the power of 1 divided by the number of years, and subtract 1. $10,000 growing to $18,000 over 5 years is (18,000 / 10,000)^(1/5) - 1 = 12.47% a year.

Why is CAGR different from the average annual return?

An average adds yearly returns and divides, which ignores compounding. A 50% gain followed by a 50% loss averages 0%, but $100 becomes $150 and then $75, a CAGR of about -13.4%. CAGR is the rate that matches what actually happened to the money.

Can I use CAGR when I added money along the way?

Not directly. CAGR assumes one starting amount and no deposits or withdrawals in between. With regular contributions, growth from new money and growth from returns are mixed together; a dollar-cost averaging or money-weighted return calculation separates them.

What is a good CAGR for a stock?

It depends on the period and the risk taken. Broad US stock indexes have compounded at roughly 10% a year over very long periods, with long stretches well above and below that. Comparing a stock's CAGR with an index fund's over the same dates is more useful than any fixed target.