Whether you’re evaluating a stock, comparing investment options, or measuring your business revenue growth, CAGR (Compound Annual Growth Rate) is the most reliable metric to use. It smooths out volatility and gives you a single, comparable annual rate. Our free CAGR Calculator does the math instantly.
CAGR Calculator
CAGR Calculator
What Is CAGR?
CAGR stands for Compound Annual Growth Rate. It represents the rate at which an investment would have grown if it grew at a steady rate annually. CAGR is widely used because it removes the effect of year-to-year volatility and gives a single, clean number for comparison.
For example: if your investment grew from $10,000 to $25,000 over 5 years, the CAGR is 20.11% — meaning if it had grown by exactly 20.11% every year, you'd end up at $25,000.
CAGR Formula
Example: Beginning = $10,000 | Ending = $25,000 | Years = 5
CAGR = (25,000/10,000)^(1/5) − 1 = 2.5^0.2 − 1 = 0.2011 = 20.11%
CAGR Reference Table – $10,000 Investment
| CAGR | 5 Years | 10 Years | 20 Years |
|---|---|---|---|
| 5% | $12,763 | $16,289 | $26,533 |
| 10% | $16,105 | $25,937 | $67,275 |
| 15% | $20,114 | $40,456 | $163,665 |
| 20% | $24,883 | $61,917 | $383,376 |
| 25% | $30,518 | $93,132 | $867,362 |
CAGR vs. Average Annual Return – What's the Difference?
Many investors confuse CAGR with average annual return. They are NOT the same:
- Average Annual Return: Simply adds up yearly returns and divides by years. Doesn't account for compounding.
- CAGR: Geometric mean that accounts for compounding. Always lower than or equal to the average return when returns vary.
Example: Year 1: +50%, Year 2: −33%. Average = 8.5%. CAGR = 0% (you're back to where you started).
How to Use CAGR in Real Life
- Stock evaluation: Compare a stock's 5-year or 10-year CAGR vs. the S&P 500 (historical CAGR ~10.5%)
- Business metrics: Revenue CAGR tells you how fast a company is really growing
- Real estate: Compare property value appreciation across cities or periods
- Retirement planning: Model future portfolio value assuming a realistic CAGR
What Is a Good CAGR?
- Stock market average: ~10% (S&P 500 long-term)
- Good for large-cap stocks: 12–15%
- Excellent for small/growth stocks: 20%+
- Business revenue: 15–25% is strong for an established company; startups often target 30–50%+
Frequently Asked Questions
Can CAGR be negative?
Yes. If the ending value is less than the beginning value, CAGR will be negative. For example, an investment that goes from $10,000 to $6,000 over 5 years has a CAGR of −9.6%.
What is Rule of 72?
Rule of 72 is a quick mental math shortcut: divide 72 by the CAGR to estimate how many years it takes to double your money. At 10% CAGR, your money doubles in ~7.2 years.
Is CAGR the same as IRR?
Not exactly. IRR (Internal Rate of Return) handles irregular cash flows over time. CAGR is simpler — it only uses beginning value, ending value, and time period. For a single lump-sum investment with no intermediate cash flows, CAGR equals IRR.