Compound annual growth rate answers a simple question: if something had grown at one steady rate every year, what rate would get it from where it started to where it ended? It smooths out the bumps in between, which makes it the standard way to compare a stock, a fund, a company’s revenue or a city’s population over periods of different lengths.
How to use the CAGR calculator
- Choose what to solve for: CAGR, the ending value, the beginning value or the time.
- Enter the two known values among the beginning value and ending value.
- Enter the length of the period in years, months or days — or, when solving for time, the CAGR.
- Read the result, plus total growth, the growth multiple, the simple average for comparison and the doubling time.
The chart and table show the smoothed path: what the value would have been at each year-end if growth had been perfectly even.
CAGR formula
EV is the ending value, BV the beginning value and t the number of years. Rearranged for the other unknowns:
Worked example
A fund holding grew from $12,000 to $20,500 in 6 years.
- Growth multiple: 20,500 ÷ 12,000 = 1.708333
- CAGR = 1.7083331/6 − 1 = 9.336% a year
- Total growth was 70.83%; dividing that by 6 gives a simple average of 11.806%, which overstates the true yearly rate
- At 9.336%, money doubles in about 7.77 years
Solve the other way and the same relationship holds: $12,000 growing at a steady 8% for 6 years ends at $19,042.49, and reaching $20,500 at 8% would take 6.96 years (6 years, 11 months).
Why CAGR beats the simple average
Suppose an investment gains 50% one year and loses 50% the next. The arithmetic average return is (50% − 50%) ÷ 2 = 0%, which sounds like you broke even. In dollars, $10,000 became $15,000 and then $7,500. The CAGR is (7,500 ÷ 10,000)1/2 − 1 = −13.4% a year, which matches what actually happened. The more volatile the yearly returns, the wider the gap between the two measures — and CAGR is always the one your bank balance agrees with.
Common uses
| Use | What to enter |
|---|---|
| Investment performance | Value at purchase and today, holding period |
| Company revenue or earnings | Revenue in the first and last fiscal year, years between them |
| Comparing two funds | Each fund’s start and end value over its own period |
| Planning | A target ending value and a realistic CAGR, solving for time |
Limits to keep in mind
CAGR describes the past between two dates and is sensitive to which dates you choose — starting at a market peak or trough changes the answer. It ignores risk: two investments with the same CAGR can have had very different rides. And it treats every dollar of change as growth, so contributions and withdrawals distort it. For an account you added money to, the IRR calculator gives a fairer rate; for a quick total-return view, use the ROI calculator. To estimate doubling time mentally, the rule of 72 is a handy shortcut.
Growth rates describe historical or hypothetical values and do not predict future performance. This is not financial advice.
Frequently asked questions
What is the CAGR formula?
CAGR = (ending value ÷ beginning value)^(1 ÷ years) − 1. For an investment that grew from $12,000 to $20,500 over 6 years, CAGR = (20,500 ÷ 12,000)^(1/6) − 1 ≈ 9.34% a year.
How is CAGR different from average annual return?
An arithmetic average adds up each year's percentage change and divides by the number of years, which overstates growth when returns vary. CAGR is a geometric average: it is the one constant rate that turns the starting value into the ending value.
Can CAGR be negative?
Yes. If the ending value is below the beginning value, CAGR is negative. A fall from $10,000 to $7,500 over two years is a CAGR of about −13.4% a year.
Can I use CAGR for periods that are not whole years?
Yes. Enter the length in months or days and the calculator converts it to years (months ÷ 12, days ÷ 365.25) before taking the root. CAGR for periods under a year annualizes short-term moves, which can look dramatic.
When is CAGR the wrong measure?
When money was added or withdrawn along the way. CAGR only looks at two values, so deposits would be counted as growth. For investments with interim cash flows, use an internal rate of return instead.