This all-in-one online CAGR Calculator (or compound annual growth rate calculator) performs calculations based on the CAGR formula. This formula connects the average growth rate over a period of time with the initial and final values and includes effect of compounding. You can enter the values of any three known parameters in the input fields of this calculator and find the missing parameter.
Compound annual growth rate
The compound annual growth rate, or CAGR for short, is the average rate at which some value (e.g. revenue) grows over a certain period of time assuming the value has been compounding over that time period. CAGR is often used to describe some business parameters, like revenue, investment, goods delivered, etc. CAGR smooths out the effect of volatility of periodic returns that can make arithmetic means irrelevant.
The formula for CAGR is as follows:
$$CAGR={ \left( \frac { { V }_{ f } }{ { V }_{ i } } \right) }^{ \frac { 1 }{ T } }- 1$$
where \({ V }_{ i }\) is the initial value, \({ V }_{ f }\) is the final value, and \({T}\) is the number of periods (years). Using this CAGR formula our CAGR calculator can calculate any parameter given other three parameters are known.
Key CAGR Features
• CAGR is known to be one of the most accurate ways to calculate returns for any business parameter that can rise or fall in value over time.
• CAGR can be used to compare investments of different types with one another.
• CAGR cannot tell an investor how volatile or risky the stock fund was.
The compound annual growth rate isn’t a true return rate. It is essentially a number that describes the rate at which a business parameter would have grown if it had grown the same rate every period of time and the profits were reinvested at the end of each period. In reality, this sort of performance is rare. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternatives.
Related calculators
Check out our other financial calculators such as Percent Growth Rate Calculator or Simple Interest Calculator.