What is CAGR and how do I calculate it?

CAGR (Compound Annual Growth Rate) is the mean annual growth rate over multiple years. Formula: ((Ending / Beginning)^(1/Years)) - 1. Example: $10,000 to $15,000 in 5 years: ((15000/10000)^(1/5)) - 1 = 1.0845 - 1 = 8.45% CAGR.

What is the difference between CAGR and average growth rate?

CAGR accounts for compounding (growth on growth), while simple average doesn't. If you grow 50% then -10%, simple average = 20%, but CAGR considers the actual path. CAGR is more accurate for multi-year analysis.

How do I use CAGR to predict future growth?

Multiply current value by (1 + CAGR)^Years. With 8.45% CAGR, $15,000 growing for 3 more years: $15,000 × (1.0845)^3 = $19,127. This assumes growth continues at the same rate.

It depends on context. Stock market: 7-10% is typical, tech startups: 20-40% is good, mature businesses: 3-5% is common. Compare against industry benchmarks and historical performance.

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Starting Value ($)

Ending Value ($)

Years

Formula

CAGR = ((Ending Value / Beginning Value)^(1/Years)) - 1

Example

starting Value:10000

ending Value:15000

years:5

cagr:8.45

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Frequently Asked Questions

What is CAGR and how do I calculate it?

What is the difference between CAGR and average growth rate?

How do I use CAGR to predict future growth?

What is a good CAGR?

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