CAGR calculator

CAGR, or compound annual growth rate, is the steady yearly rate that takes a value from where it started to where it ended. It smooths out the ups and downs of the years in between, so you can compare investments, revenue or markets over different periods.

CAGR = (End value / Start value)^(1 / Years) − 1

Divide the end value by the start value, raise the result to one over the number of years, and subtract one. Multiply by 100 to read it as a percentage.

An investment grows from 1.000 to 2.500 in 5 years. 2.500 / 1.000 is 2,5. Raised to 1/5 it gives 1,2011. Subtract one and the CAGR is 20,1 % a year. That is well below the 30 % a year you get by simply dividing the total growth of 150 % by five, because each year's growth compounds on the last.

With the start value in B1, the end value in B2 and the years in B3:

=(B2/B1)^(1/B3)-1

Excel also has a function for it:

=RRI(B3,B1,B2)

CAGR only looks at the first and last values. Two investments with the same CAGR can have very different risk along the way, and it ignores money added or taken out during the period. With interim cash flows, use IRR instead.

With one investment and one exit, they are the same number. They differ when there are cash flows in between: IRR takes them into account and CAGR does not. In private equity, a deal with no dividends has an IRR equal to the CAGR of its equity value.