Investments • Annualized growth
CAGR Calculator
Calculate the smoothed annual growth rate between a positive starting value and ending value. CAGR simplifies comparison but does not show the path taken between them.
Enter start and end values
How to use it
- Enter the positive starting value.
- Enter the positive ending value.
- Enter elapsed years.
- Calculate the annualized percentage.
- Compare only periods measured consistently.
Values can represent a portfolio, business revenue or another quantity where no intermediate cash flows need to be modelled.
Formula
CAGR = (Final ÷ Initial)1 ÷ Years − 1
The result is multiplied by 100 for percentage display and rounded to two decimal places. Initial and final values must be positive; years must be above zero.
Worked example
An investment grows from ₹5,00,000 to ₹9,00,000 in 5 years.
| Initial value | ₹5,00,000 |
|---|---|
| Final value | ₹9,00,000 |
| CAGR | 12.47% |
This means a constant rate of about 12.47% would mathematically connect the two values. The actual yearly returns could have varied sharply.
Business example
If revenue rises from ₹20 lakh to ₹30 lakh in four years, CAGR summarizes that change. It does not explain margins, debt, seasonality or whether growth was steady.
Common mistakes
- Using CAGR when deposits or withdrawals occurred.
- Comparing different time windows.
- Ignoring volatility and drawdowns.
- Treating historical CAGR as a forecast.
Practical interpretation
- Use total-return values consistently.
- Pair CAGR with risk and cost measures.
- Check whether cash flows require XIRR instead.
- Use exact elapsed time when possible.
- Compare against a relevant benchmark, not any convenient number.
Related resources
Frequently asked questions
What does CAGR mean?
The constant annual rate connecting start and end values.
Is it each year's actual return?
No.
Can CAGR be negative?
Yes, if final value is below initial value.
Does it include cash flows?
No.
Can it compare investments?
Yes, but risk, cost and timing also matter.
Can it describe revenue growth?
Yes.
Why must values be positive?
The standard real-valued formula requires them.
Does CAGR predict the future?
No.
Educational disclaimer
This calculator is for education. CAGR summarizes a period and does not guarantee future investment or business performance.