CAGR Calculator
Enter a beginning value, ending value, and the number of years between them to calculate the compound annual growth rate (CAGR) — the smoothed annual rate that would produce the same overall growth.
How the CAGR formula works
The CAGR formula:
CAGR = ( (Ending value / Beginning value)^(1/years) − 1 ) × 100
Step-by-step calculation
- Divide the ending value by the beginning value.
- Raise that ratio to the power of 1 divided by the number of years.
- Subtract 1 and multiply by 100 to express as a percentage.
Worked example
Revenue grows from $2 million to $5 million over 6 years: CAGR = (5/2)^(1/6) − 1 = 2.5^(0.1667) − 1 ≈ 0.1665, or about 16.65% per year.
Frequently asked questions
Why use CAGR instead of a simple average of yearly growth rates?
CAGR accounts for compounding, reflecting the actual smoothed path from the beginning to ending value. A simple average of year-over-year percentage changes can be misleading, especially with volatile or uneven growth patterns.
Does CAGR reflect what happened every single year?
No — CAGR only shows the smoothed average rate that connects the beginning and ending values, not the actual (often uneven) year-by-year path, which could have included down years even with an overall positive CAGR.