CAGR calculator
From a starting value to an ending value over a number of years: the constant annual rate it grew at. It works for an investment, a company’s revenue or earnings per share.
The starting values are an example and are deliberately invented, with round figures so the arithmetic can be redone by hand. They are not data from any real company.
The path at that rate
The value it would have had each year if it had grown at exactly the CAGR. The real path is never that smooth.
The CAGR says nothing about what happened in between: a +50% followed by a −30% gives almost the same CAGR (2.47%) as two years at 2.5%.
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The formula
CAGR = (Ending value ÷ Starting value)^(1 ÷ years) − 1
How it is calculated
The CAGR is the annual rate that, applied each year to the previous year’s result, takes the starting value to the ending value. From €10,000 to €25,000 in ten years: (25,000 ÷ 10,000)^(1/10) − 1 = 9.60% a year. The multiplier is 2.5 times, and at that rate capital doubles every 7.6 years.
It is not the simple average. Dividing the 150% total growth by ten years gives 15% a year, and it is wrong: 15% compounded for ten years would multiply by 4, not by 2.5. The simple average ignores that each year grows on top of what already grew, which is why it always comes out higher than the CAGR.
What it is for and what it is not
It lets you compare growth over different periods in a single number: one company’s revenue over five years against another’s over eight, or an investment against an index. It is the number people mean when they say a company "grows at 12%".
It says nothing about the path. A +50% followed by a −30% leaves 1.05: almost the same CAGR (2.47%) as two quiet years at 2.5%. And it depends entirely on the two points chosen: measuring from a low or up to a high inflates the number. For a bumpy series, look at volatility and maximum drawdown too.
With an ending value below the starting one the CAGR is negative and reads the same way: from €10,000 to €8,000 in three years is −7.17% a year. With a starting value of zero it does not exist: there is no rate that takes nothing to something.
Frequently asked questions
What is CAGR?
The compound annual growth rate: the constant annual rate that takes a starting value to an ending value over a number of years, as if each year had grown by exactly the same amount on top of the previous one. From €10,000 to €25,000 in ten years it is 9.60%.
What is the CAGR formula?
CAGR = (ending value ÷ starting value) to the power of (1 ÷ years), minus 1. In a spreadsheet: =(end/start)^(1/years)-1. With months, use fractional years (18 months = 1.5).
How is it different from the average return?
Two shortcuts do not work. Dividing total growth by the years (150% ÷ 10 = 15%), which is what the calculator’s "total growth ÷ years" figure shows, always comes out higher than the CAGR (9.60%). And the arithmetic mean of annual returns: with a +50% and a −30% it gives +10%, when the CAGR is +2.47%. The CAGR accounts for each year starting from the previous result, and it is what you actually have in your pocket.
Does it work for a company’s revenue or earnings?
Yes, and it is its most common use in fundamental analysis: revenue, EBITDA or earnings-per-share CAGR over 3, 5 or 10 years. The two years should be comparable: a year with a one-off sale or an acquisition distorts the result.
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Do it on a real company
Celsmar computes this from the accounts companies file with their regulator, and shows which line every figure comes from. Free to start, no card.
A calculation tool for informational purposes. It is not financial advice nor a recommendation to buy or sell, and its result depends entirely on the assumptions you enter.