What CAGR measures
Compound annual growth rate expresses the change between a starting value and an ending value as one equivalent annual growth rate. It is useful for comparing growth over periods of different lengths.
CAGR formula
The formula is (Ending Value / Starting Value)^(1 / Years) - 1. Multiply the result by 100 to express it as a percentage.
Example
If a value rises from 100 to 150 over 4 years, CAGR is not simply the total 50% increase divided by four. The compound formula finds the annual rate that would grow 100 to 150 over the same period.
What CAGR does not show
CAGR smooths the path. It does not reveal whether the value rose steadily, fell sharply in one year, or changed unevenly between the start and end dates.
Calculate the annualized rate with the CAGR Calculator.