CAGR Calculator
Calculate your Compound Annual Growth Rate (CAGR) to understand the true annualized return of your investments, business revenue, or portfolio performance over time.
Compound Annual Growth Rate
8.45%
Growing from £10,000.00 to £15,000.00 over 5.00 years uses an annualized growth rate of 8.45%.
CAGR
8.45%
Total Return
50.00%
Total Profit
£5,000.00
Timeframe
5.00 years
Year-by-Year Growth
| Year | Estimated Value | Total Growth |
|---|---|---|
| 1 | £10,844.72 | +£844.72 |
| 2 | £11,760.79 | +£1,760.79 |
| 3 | £12,754.25 | +£2,754.25 |
| 4 | £13,831.62 | +£3,831.62 |
| 5 | £15,000.00 | +£5,000.00 |
About This CAGR Calculator
The Compound Annual Growth Rate (CAGR) is one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time. Unlike an absolute return or arithmetic mean, CAGR represents the smoothed annualized rate of return.
Think of CAGR as the theoretical steady growth rate required for an investment to grow from its initial balance to its final balance, assuming profits were reinvested at the end of each year. It is useful for comparing assets, analyzing revenue growth, and evaluating long-term portfolio performance without year-to-year noise.
How To Use
How to calculate CAGR
Use Find CAGR. Enter your beginning value, ending value, and number of years to calculate the smoothed annual growth rate.
How to calculate annualized return
CAGR and annualized return are the same mathematical idea. Use Required Rate to work out the yearly return needed for a goal.
Calculate ending value from CAGR
Use Find End Value when you know the starting value, expected CAGR, and time period.
Calculate years to reach target
Use Find Years when you know your current value, target value, and assumed annual growth rate.
Why CAGR is useful for comparing growth
CAGR cuts through misleading arithmetic averages and creates a standardized baseline to compare assets, revenue, or portfolio growth.
Frequently Asked Questions
What is the formula for CAGR?v
CAGR = (Ending Value ÷ Beginning Value)^(1 ÷ Years) - 1. The result is usually shown as a percentage.
Is CAGR the same as Average Annual Return?v
Not exactly. CAGR is a smoothed annualized growth rate. Average annual return can be distorted by volatility.
Can CAGR be negative?v
Yes. CAGR is negative when the ending value is lower than the beginning value over the selected period.
What are the limitations of CAGR?v
CAGR smooths performance and does not show volatility, risk, cash flows, or year-to-year changes.
How is CAGR different from Internal Rate of Return (IRR)?v
CAGR uses a beginning value, ending value, and time period. IRR can account for multiple cash flows during the period.
What is considered a good CAGR?v
A good CAGR depends on the asset, risk level, market, and timeframe. Higher growth is not always better if it comes with higher risk.