What CAGR actually tells you
Compound annual growth rate answers a deliberately narrow question: if this had grown by exactly the same percentage every year, what percentage would that have been? Nothing more. It takes two numbers — where you started and where you ended — plus the time between them, and returns the one steady rate that connects them.
That narrowness is the whole point. A holding worth 25,000 that is worth 58,400 nine years later has a CAGR of about 9.89%. It almost certainly did not grow 9.89% in any single one of those nine years. It may have fallen 30% in one of them. CAGR deliberately erases that, because the question it exists to answer is how do I compare this against something else, and you cannot compare two jagged lines by eye.
The trade-off is that CAGR describes a journey it did not take. It is a summary, and like every summary it is useful precisely because it throws information away. Knowing which information it threw away is what separates using it well from being misled by it.
The formula, and the four things it can solve for
The formula itself is one line:
CAGR = (Final value ÷ Starting value)1 ÷ periods − 1
Multiply by 100 for a percentage. Taking the root rather than dividing is what makes it compound rather than simple: you are undoing nine years of multiplication, not sharing out a total.
Because it is one equation with four quantities in it, knowing any three gives you the fourth. That is why this page has four tabs rather than one, and it is what people are usually reaching for when they search for a reverse CAGR calculator:
- Growth rate — you have a start and an end, and you want the rate. This is CAGR in its ordinary sense.
- Final value — you have a starting amount and a rate, and want to know where it lands. Final = Start × (1 + rate)periods.
- Starting value — you have a target and a rate, and want to know what you would need to begin with. Start = Final ÷ (1 + rate)periods.
- Time needed — you have both values and a rate, and want the years. This one needs a logarithm: periods = ln(Final ÷ Start) ÷ ln(1 + rate).
All four are exact rearrangements, so they round-trip. Solve for a final value, feed it back into the rate tab, and you get your original rate returned to the last decimal.
How many periods to enter — the mistake that skews every result
This is the single most common way a CAGR calculation goes wrong, and it produces a plausible-looking number rather than an obvious error, which is what makes it dangerous.
Suppose you have annual revenue for 2020, 2021, 2022 and 2023. That is four figures but three years of growth. The gaps between the numbers are what compound, not the numbers themselves. Enter 3, not 4.
The cost of getting it wrong is not small. Take a value that doubles from 100 to 200:
- Over 3 periods, the CAGR is 25.99%.
- Over 4 periods, the same doubling reads as 18.92%.
Seven percentage points of difference, from one off-by-one. Neither figure looks wrong on its own, which is exactly why nobody catches it. The habit worth building: before entering a period count, say out loud what the first and last dates are, and subtract. Dates, not rows.
The same logic applies to a stock price quoted on the same calendar day five years apart — that is five years, not six, however many year-end prices you happened to write down.
What to put in each field
Starting value. The value at the beginning of the window, in whatever unit you care about. It does not have to be money — CAGR is used just as often for revenue, subscriber counts, headcount, production volume or population. The only requirement is that it is above zero, because you cannot take a meaningful ratio against nothing.
Final value. The value at the end of the same window, measured the same way. Consistency matters more than precision here: comparing a figure that includes one subsidiary against one that does not will produce a confident and completely wrong rate.
Length of period. The time between those two measurements. Years is the usual unit, but you can enter quarters, months, weeks or days and the calculator converts to a fraction of a year before applying the formula. The result stays annualised regardless.
Growth rate. Used in the three reverse modes. Enter it as a percentage — 9.89, not 0.0989. Negative values are accepted and describe a steady decline.
The optional adjustments. Behind More Options there are three assumptions of yours, not facts of ours. An annual fee is subtracted from the rate, matching how fund expense ratios are conventionally presented. A tax rate is applied to the gain only, never to the capital you started with. An inflation rate produces a real CAGR alongside the nominal one, and it divides rather than subtracts: real = (1 + nominal) ÷ (1 + inflation) − 1. At 10% nominal and 3% inflation the real rate is 6.80%, not the 7% a straight subtraction suggests.
CAGR over periods shorter than a year
You can calculate CAGR across eight months or three weeks, and the calculator will let you. Whether you should is a separate question.
The mechanics are straightforward. Eight months is two-thirds of a year, so the exponent becomes 1 ÷ 0.667, or 1.5. A 10% gain over eight months annualises to about 15.4%, because the formula is asking what rate, sustained for a full twelve months, would have produced that pace.
That word sustained is where the caution lives. Annualising a short window assumes the pace continues, and short windows are dominated by noise. A quarter that happens to contain a product launch, a one-off contract or a market panic will annualise into a rate that has no chance of holding. The figure is arithmetically correct and practically meaningless.
A reasonable rule: use sub-annual CAGR to compare two things measured over the identical short window, where the noise is at least shared. Avoid using it to project forward, and be sceptical of anyone quoting an annualised rate from a period they chose after seeing the data.
CAGR, average return and IRR — which one answers your question
Three measures get used interchangeably and should not be. The deciding factor is almost always whether money moved in or out during the period.
CAGR looks at exactly two points and nothing between them. It is the right tool when there were no contributions or withdrawals: a lump sum left alone, a company's revenue line, a price series.
A simple average of annual returns is almost always the wrong tool, and it is wrong in a consistent direction — it flatters. Gain 50% then lose 50% and the arithmetic average is 0%, while you are actually down 25%. CAGR reports the −13.4% a year that genuinely happened. The gap between those two numbers widens with volatility, which is why it is worth understanding properly; our average return calculator covers the arithmetic-versus-geometric distinction in depth.
IRR is what you need the moment cash flows in or out partway through. If you added 500 a month to a portfolio, CAGR on the opening and closing balances will credit your deposits as though they were growth. IRR weights every cash flow by how long it was actually invested. Our ROI calculator covers where each of these fits.
A short way to choose: two numbers and no cash flows, use CAGR. Cash flows, use IRR. A list of yearly returns, use the geometric mean — which, satisfyingly, gives you the same answer CAGR would.
Where CAGR misleads, and how to spot it
Because CAGR uses only the first and last values, whoever chooses those two dates controls the answer. This is not a subtle effect. The same investment, measured across overlapping windows, can honestly be described as growing 26% a year or 1.8% a year depending purely on which year you call the start.
Three things to check whenever you are handed a CAGR rather than calculating one yourself:
- Does the window start at a trough? A rate measured from the bottom of a crash is a recovery, presented as growth.
- Is the window an odd length? Seven-year and eleven-year figures are worth a second look. Round numbers get chosen for convention; unusual ones often get chosen for their result.
- Does it survive a different window? Recalculate over a period one or two years longer. A durable rate barely moves. A fragile one collapses.
The second limitation is that CAGR says nothing about risk. Two holdings can share a 9% CAGR where one moved in a straight line and the other halved twice along the way. Anyone who needed their money during one of those falls experienced very different outcomes from the same headline number. CAGR measures the destination, never the ride.
What this calculator does not cover
Stated plainly, so nothing here is mistaken for more than it is:
- Contributions and withdrawals. Nothing added or removed mid-period is modelled. If money moved, this is the wrong measure and IRR is the right one.
- Volatility and sequence. The year-by-year table shows a smooth curve because CAGR implies one. Real paths are not smooth, and the order returns arrive in matters enormously if you are drawing an income.
- Currency effects. A holding measured in one currency and spent in another has a second growth rate running underneath it that this page does not see.
- Tax detail. The optional tax field applies one flat rate to the whole gain. Real treatment depends on your country, your account type, your holding period and your income band, and no single field can stand in for that.
- Any claim about the future. A rate measured over the past is a description of the past. The reverse modes project a rate you supplied, which makes them arithmetic about your assumption, not a forecast.
Frequently asked questions
What is a good CAGR?
It depends entirely on what you are measuring and over what period. Broad stock market indices have historically compounded somewhere around 7% to 10% a year over multi-decade spans, so a portfolio CAGR in that range is unremarkable rather than impressive. For a single company's revenue, anything sustained above 20% is genuinely rare. The only comparison that means much is against a relevant benchmark over the identical window, because a CAGR measured across a different set of years is not comparable at all.
How do I calculate CAGR in Excel?
Use =POWER(final/start, 1/years)-1 and format the cell as a percentage. If your starting value is in B1, your final value in B2 and your number of years in B3, the formula is =POWER(B2/B1,1/B3)-1. There is no dedicated CAGR function in Excel, which is why the RRI function is often suggested instead: =RRI(B3,B1,B2) returns the same figure. Both give an annual rate, so the years argument must be the number of years, not the number of data points.
Can CAGR be negative?
Yes, and a negative result is perfectly valid rather than an error. If the final value is lower than the starting value, the compound annual growth rate is the steady annual rate of decline that would take you from one to the other. A holding that fell from 1,000 to 500 over five years has a CAGR of about -12.94%. This calculator returns negative rates rather than rejecting them, because a decline is a real thing people need to measure.
Is CAGR the same as annualised return?
For a single lump sum with no money added or withdrawn, yes, the two are the same figure. They diverge as soon as there are contributions or withdrawals partway through, because CAGR only ever looks at the first and last value and ignores everything in between. Once cash moves in or out during the period you need a money-weighted measure such as IRR instead, which weights each cash flow by how long it was actually invested.
How many periods do I enter if I have a list of yearly figures?
Enter the number of gaps between the figures, not the number of figures. Annual revenue for 2020, 2021, 2022 and 2023 is four data points but only three years of growth, so the period is 3. Entering 4 spreads the same growth over an extra year and quietly understates the rate. On a doubling this is the difference between 25.99% and 18.92%, which is large enough to change a conclusion.
Does this calculator account for fees, tax or inflation?
Only if you ask it to. The headline figure is nominal and before costs, which is the standard way CAGR is quoted. Open More Options and you can enter an annual fee, which is subtracted from the growth rate the way a fund expense ratio is normally presented, a tax rate applied to the gain to show an after-tax final value, and an inflation rate used to show the real CAGR alongside the nominal one. All three are your assumptions rather than anything this page knows about your situation.
These results are estimates for general information only and are not investment advice. Past growth rates do not predict future performance, and any projection here reflects assumptions you entered rather than an expected outcome. Figures exclude trading costs and currency effects unless you add them, and tax treatment varies by country and account type. Confirm any figure against primary sources, and speak to a qualified financial adviser before making investment decisions.