CAGR calculator
CAGR, the compound annual growth rate, is the one steady yearly rate that links a start value and an end value: (end ÷ start)^(1 ÷ years) − 1. Revenue that goes from $50,000 to $72,000 in 2 years grew 20% a year, because 1.2 × 1.2 = 1.44. It hides the path in between.
- Growth multiple (end ÷ start)
- CAGR
The end value at a steady rate
- End value
Formula
CAGR = (End ÷ Start)^(1 ÷ Years) − 1End = Start × (1 + CAGR)^Years
Worked example
A food truck's revenue goes from $50,000 to $72,000 over 2 years. What is the compound annual growth rate, as a percent?
- $72,000 ÷ $50,000 = 1.44.
- 1.2 × 1.2 = 1.44, so the CAGR is 20% a year.
Answer: 20%
Do it in your head: Find the steady factor
- Find the growth multiple: end ÷ start, or the yearly factors multiplied.
- Find the factor that gives it when used once per year: 1.1 × 1.1 × 1.1 = 1.331.
- Subtract 1 and write it as a percent.
The yearly rate behind a growth multiple
| Growth | In 3 years | In 5 years | In 10 years |
|---|---|---|---|
| 1.5× | 14.5% | 8.4% | 4.1% |
| 2× (doubling) | 26% | 14.9% | 7.2% |
| 3× | 44.2% | 24.6% | 11.6% |
Try three
-
Revenue goes from $177,000 to $254,880 over 2 years. What is the compound annual growth rate, as a percent? (Use a minus sign for a decline.)
Show the answer
20%
- Growth multiple = $254,880 ÷ $177,000 = 1.44.
- Which yearly factor, used 2 times, gives 1.44? 1.2, since 1.2 × 1.2 = 1.44.
- So the CAGR is 20% a year.
-
Revenue rises 28% in year 1 and falls 50% in year 2. What is the compound annual growth rate over the two years, as a percent? (Use a minus sign for a decline.)
Show the answer
−20%
- Multiply the yearly factors: 1.28 × 0.5 = 0.64.
- The yearly factor that gives 0.64 over two years is 0.8 (0.8 × 0.8 = 0.64), so the CAGR is −20%.
-
Assume an investment doubles every 3 years. How many years does it take to grow from $30,000 to $60,000?
Show the answer
3
- $60,000 ÷ $30,000 = 2: one doubling.
- 1 doubling × 3 years = 3 years.
That’s the idea. Keep going: 4 warm-up problems, no sign-up →
Learn it properly: CAGR & Doubling →
Questions
Why not just average the yearly growth?
Because changes multiply. Up 100% then down 50% ends where it started, a CAGR of 0%, but the average of +100% and −50% is +25%.
Is CAGR a forecast?
No. It describes the past as if growth had been steady. The real path may have been bumpy.
Can CAGR be negative?
Yes. From $10,000 to $6,400 in 2 years is −20% a year, because 0.8 × 0.8 = 0.64.
How does CAGR relate to the rule of 72?
At a CAGR of r%, the value doubles in about 72 ÷ r years. At 12% that is 6 years.