CAGR Calculator

How to calculate CAGR

To calculate CAGR you need just three numbers: the value you started with, the value you ended with, and the length of time in between. Divide the final value by the initial value to get the total growth factor, raise that factor to the power of one divided by the number of years, and subtract 1. The result is the steady annual rate that would have taken you from the start value to the end value if growth had been perfectly smooth.

The CAGR calculator above does this in one step. Enter the starting and ending amounts, choose whether your time period is in years, months, or days, and it returns the rate along with the total growth over the whole stretch. Because it works straight from the numbers you type, it doubles as a compound annual growth rate calculator and as a general growth calculator investment analysts can use to put very different holding periods on the same yearly scale.

If you prefer to do it by hand, the annual growth rate formula is the same one shown in the results panel, with your own figures substituted line by line so you can follow exactly how the rate is derived.

CAGR formula

The CAGR formula is:

CAGR = (Final value / Initial value)^{(1 / years)} − 1

That single line is also written as the compound growth rate formula or, spelled out in full, the annual compound growth rate formula — they all describe the same calculation. Some sources drop the word "rate" and call it the compound growth formula, but the math does not change: a ratio of ending to beginning value, raised to the reciprocal of the number of periods, minus one.

When your time period is measured in months or days, convert it to years first — divide months by 12 or days by 365 — and feed that into the exponent. The calculator handles this conversion for you, so the CAGR equation always resolves to a clean per-year rate regardless of the unit you start from. If you only ever remember one version, the annual growth rate formula above is enough to reproduce every result on this page.

What is CAGR (meaning and definition)

CAGR stands for compound annual growth rate. The CAGR meaning is simple: it is the constant yearly rate at which an amount would have to grow, compounding each year, to move from its starting value to its ending value over a given period. The CAGR definition deliberately smooths out the bumps — it ignores the ups and downs along the way and reports a single representative annual figure.

If you have ever typed cagr what is into a search bar and wanted a plain answer, here it is: it is a smoothed average return per year, expressed as a percentage. That makes it the standard yardstick for comparing investments held for different lengths of time, which is exactly what this compound growth rate calculator is built to do.

You will occasionally see the metric mislabelled — for instance as a cumulative annual growth rate calculator — but "compound" is the correct word, because each year's growth builds on the result of the year before rather than simply adding up.

How to calculate CAGR in Excel

Spreadsheets make this quick. The cagr formula excel users rely on is a direct translation of the equation above. If your starting value is in cell B2, your ending value in B3, and the number of years in B4, type:

=(B3/B2)^(1/B4)-1

Format the cell as a percentage and you are done — that is the whole cagr calculation excel needs, no add-ins required. You can also use the built-in RRI function, =RRI(B4, B2, B3), which returns the same number. Both approaches give you a reusable annual growth rate formula excel can recalculate instantly whenever you change the inputs, and both match the result this calculator produces.

CAGR vs average return

CAGR and a simple average return answer different questions. A simple average just adds each year's percentage change and divides by the number of years. CAGR instead reflects compounding, so it accounts for the fact that gains and losses build on the balance that came before them.

The gap matters most when returns swing wildly. Imagine a fund that rises 50% one year and falls 50% the next. The simple average is 0%, suggesting you broke even — but in reality $100 becomes $150, then drops to $75, a real loss. CAGR captures that correctly, reporting a negative annual rate. That is why analysts treat CAGR as the more honest measure of how an investment actually performed over time, and why this tool reports it rather than a plain average.