What does CAGR stand for?

CAGR stands for compound annual growth rate. It expresses the rate at which a value would have grown each year, on average, if it had increased at a perfectly consistent pace from its starting point to its end point.

How do I calculate CAGR?

Divide the end value by the start value. Raise the result to the power of one divided by the number of years. Subtract one, then multiply by 100 to express the answer as a percentage. The formula written out: (End ÷ Start)^(1 ÷ Years) − 1, times 100. The calculator on this page applies this formula automatically once you enter your numbers.

It depends on the context. For a broad stock market index fund, a CAGR of seven to ten percent per year is what most investors consider solid over long periods. For a fast-growing technology company, 20 to 30% or above might be the relevant benchmark. For a savings account, four to five percent is strong in most interest rate environments. The most useful approach is to compare a CAGR against a relevant benchmark rather than treating any single number as universally strong or weak.

What is the difference between CAGR and average annual growth rate?

Average annual growth rate adds up all the year-by-year percentage changes and divides by the number of years. CAGR uses only the start and end values, ignoring what happened in between. Because percentage gains and losses are asymmetric, a simple average can give a misleading result. An investment that gains 100% then loses 50% shows an average annual return of 25%, but the investor broke even. CAGR correctly reports 0%.

Can CAGR be negative?

Yes. If the end value is lower than the start value, the CAGR is negative. This represents shrinkage rather than growth. A company whose revenue fell from £500,000 to £350,000 over four years has a CAGR of approximately −8.5% per year. Negative CAGR is a useful way to quantify how quickly a value has declined over time.

What does CAGR stand for?

CAGR stands for compound annual growth rate. It expresses the rate at which a value would have grown each year, on average, if it had increased at a perfectly consistent pace from its starting point to its end point.

How do I calculate CAGR?

Divide the end value by the start value. Raise the result to the power of one divided by the number of years. Subtract one, then multiply by 100 to express the answer as a percentage. The formula written out: (End ÷ Start)^(1 ÷ Years) − 1, times 100. The calculator on this page applies this formula automatically once you enter your numbers.

It depends on the context. For a broad stock market index fund, a CAGR of seven to ten percent per year is what most investors consider solid over long periods. For a fast-growing technology company, 20 to 30% or above might be the relevant benchmark. For a savings account, four to five percent is strong in most interest rate environments. The most useful approach is to compare a CAGR against a relevant benchmark rather than treating any single number as universally strong or weak.

What is the difference between CAGR and average annual growth rate?

Average annual growth rate adds up all the year-by-year percentage changes and divides by the number of years. CAGR uses only the start and end values, ignoring what happened in between. Because percentage gains and losses are asymmetric, a simple average can give a misleading result. An investment that gains 100% then loses 50% shows an average annual return of 25%, but the investor broke even. CAGR correctly reports 0%.

Can CAGR be negative?

Yes. If the end value is lower than the start value, the CAGR is negative. This represents shrinkage rather than growth. A company whose revenue fell from £500,000 to £350,000 over four years has a CAGR of approximately −8.5% per year. Negative CAGR is a useful way to quantify how quickly a value has declined over time.

CAGR Calculator

CAGR (compound annual growth rate) is the steady annual growth rate that would take a value from its starting point to its ending point over a set number of years. It strips out year-to-year noise and gives you one number that captures the full journey. Three modes: find the CAGR between two values, project a future value at a known growth rate, or calculate how many years it takes to grow at a given rate.

You know the start and end values and the number of years.

Start value

The value at the beginning of the period

End value

The value at the end of the period

Number of years

How long the period lasted

How to use this calculator

Find the CAGR: enter your start value, end value, and the number of years between them. Use this when you want to know how fast something has grown, or to compare the growth rate of two different things.

Find the end value: enter your start value, a CAGR percentage, and the number of years. Use this to forecast where a value will be in the future given a consistent annual growth rate.

Find the number of years: enter your start value, end value, and a CAGR percentage. Use this when planning a savings target or comparing how quickly different investments might reach a goal.

Formula

Find the CAGR:

CAGR = (End ÷ Start)^(1÷Years) − 1

Multiply by 100 to express as a percentage

Find the end value:

End = Start × (1 + CAGR÷100)^Years

Find the number of years:

Years = log(End÷Start) ÷ log(1 + CAGR÷100)

Worked examples

Finding the CAGR

Investment: £10,000 → £16,105 over 5 years

(16,105÷10,000)^(1÷5) − 1 = 1.6105^0.2 − 1 = 10.00%

Revenue: £240,000 → £380,000 over 3 years

(380,000÷240,000)^(1÷3) − 1 = 1.5833^0.333 − 1 = 16.50%

Finding the end value

£50,000,000 growing at 7.5% for 6 years

50,000,000 × (1.075)^6 = 50,000,000 × 1.5433 = £77,165,234.90

Finding the number of years

£25,000 → £64,500 at 9.9% CAGR

log(64,500÷25,000) ÷ log(1.099) = log(2.58) ÷ log(1.099) = 10.0 years

How it works

CAGR is most useful when comparing two things that grew at different rates over different periods. A business that grew from £50k to £200k in three years and one that grew from £1m to £4m in six years both quadrupled, but the first did it twice as fast. CAGR reduces both to a single annual percentage you can compare directly.

The reason CAGR is more reliable than a simple average of annual returns is that percentage gains and losses are not symmetrical. Consider an investment that rises 100% in year one and falls 50% in year two. The average annual return is 25%, which sounds like solid growth. But the investor started with £100, ended with £100, and made nothing. CAGR correctly reports 0%.

CAGR has limits. It assumes growth happens at a perfectly steady rate every year, which almost never happens in practice. A company that grew 60% one year and shrank the next might show a calm CAGR that hides all that movement. For situations with multiple cash flows or irregular timing, internal rate of return (IRR) is the more appropriate measure.

Common uses

Investment returns: comparing the long-term performance of different assets, funds, or portfolios on a consistent, like-for-like basis
Business revenue growth: tracking how quickly a company's income has grown across multiple years, regardless of annual variations
Market size growth: estimating how large an industry has been growing and projecting its future size for strategic planning
Savings account comparisons: understanding the real annual growth of a savings product, particularly when interest compounds at different intervals
Property value growth: calculating the rate at which a property's value has increased over a period of ownership
Subscriber or user growth: measuring how fast a user base, mailing list, or customer count has expanded over time
Inflation modelling: understanding the average annual rate of price increase connecting a figure in one year to the same figure in another
Sales forecasting: projecting future revenue or sales volumes by applying a consistent growth rate to a known base figure

Frequently asked questions

: CAGR stands for compound annual growth rate. It expresses the rate at which a value would have grown each year, on average, if it had increased at a perfectly consistent pace from its starting point to its end point.
: Divide the end value by the start value. Raise the result to the power of one divided by the number of years. Subtract one, then multiply by 100 to express the answer as a percentage. The formula written out: (End ÷ Start)^(1 ÷ Years) − 1, times 100. The calculator on this page applies this formula automatically once you enter your numbers.
: It depends on the context. For a broad stock market index fund, a CAGR of seven to ten percent per year is what most investors consider solid over long periods. For a fast-growing technology company, 20 to 30% or above might be the relevant benchmark. For a savings account, four to five percent is strong in most interest rate environments. The most useful approach is to compare a CAGR against a relevant benchmark rather than treating any single number as universally strong or weak.
: Average annual growth rate adds up all the year-by-year percentage changes and divides by the number of years. CAGR uses only the start and end values, ignoring what happened in between. Because percentage gains and losses are asymmetric, a simple average can give a misleading result. An investment that gains 100% then loses 50% shows an average annual return of 25%, but the investor broke even. CAGR correctly reports 0%.
: Yes. If the end value is lower than the start value, the CAGR is negative. This represents shrinkage rather than growth. A company whose revenue fell from £500,000 to £350,000 over four years has a CAGR of approximately −8.5% per year. Negative CAGR is a useful way to quantify how quickly a value has declined over time.

Related calculators

Percentage Increase Calculator → Find the percentage by which a value has risen between two points. Percentage Change Calculator → Calculate the percentage change, positive or negative, between any two values. Reverse Percentage Calculator → Work backwards from a final value to find the original, before a percentage was applied.

Last reviewed: May 2026