CAGR Calculator

A CAGR calculator works out the Compound Annual Growth Rate of an investment, business metric, or any value that changes over multiple years, giving you a single smoothed annual growth rate that represents the overall trajectory. It is used by investors comparing portfolio performance, analysts tracking business revenue growth, business owners benchmarking against industry competitors, fund managers reporting to limited partners, and anyone who wants to express multi-year growth as a single comparable figure rather than a noisy sequence of annual returns.

CAGR is the financial world's most-cited growth statistic for a reason: it strips out timing and volatility to give one number that captures the average pace of growth. When you read that "the S&P 500 returned 10% annually over the last 50 years," that is CAGR. When a startup pitch deck claims "100% year-over-year growth," that is CAGR. When a fund manager shows a chart with a single smooth curve rising from £10,000 to £250,000 over a decade, that curve was generated using CAGR. The metric is everywhere, and understanding exactly what it does and does not tell you is essential for anyone making decisions based on growth numbers.

How to Use the CAGR Calculator

1. Enter the starting value (the value at the beginning of the period).
2. Enter the ending value (the value at the end of the period).
3. Enter the number of years between the two values (whole years or fractions, 3.5 years is valid if you invested partway through a year).
4. Click Calculate to see the CAGR as a percentage.
5. Optionally, use the calculator in reverse: enter a starting value, a target CAGR, and a number of years to project a future value, or work backwards from a future value to find the implied CAGR.

The calculator also supports negative growth (a falling series will produce a negative CAGR) and accepts any currency or unit, the formula is unit-agnostic because it is a ratio of two values raised to a power.

The Formula

CAGR = ((Ending Value / Starting Value)^(1 / Number of Years) - 1) x 100

Where the result is expressed as a percentage. The formula has three inputs and one output. Mathematically it is the geometric mean of the growth factor over each year, normalised to a single annual rate. If you reverse the calculation to project a future value from a known CAGR:

Future Value = Starting Value x (1 + CAGR / 100)^Years

And if you know three of the four variables (starting value, ending value, years, CAGR), you can solve for the fourth. The CAGR calculator above handles all four directions.

Real-World Worked Examples

Example 1, Long-term investment

You invested £8,000 in a global equity fund 7 years ago. It is now worth £14,500.

CAGR = ((14,500 / 8,000)^(1/7) - 1) x 100 = (1.8125^0.1429 - 1) x 100 = (1.0878 - 1) x 100 = 8.78% per year

This 8.78% CAGR is the smoothed annual growth rate. In reality the fund may have risen 20% in one year and fallen 5% in another, but the CAGR represents the consistent annual rate that would have produced the same total result.

Projecting forward: if this 8.78% rate continues for 5 more years, the current £14,500 becomes:

Future Value = £14,500 x (1.0878)^5 ≈ £21,990

Example 2, Business revenue growth

A SaaS company had £2.4M in annual recurring revenue 4 years ago. ARR last quarter was £6.1M.

CAGR = ((6.1 / 2.4)^(1/4) - 1) x 100 = (2.5417^0.25 - 1) x 100 = (1.2634 - 1) x 100 = 26.34% per year

A 26% CAGR over four years puts the company in the top quartile of SaaS growth rates (the median high-growth SaaS company targets 20%+ CAGR). This is a credible growth metric to present to investors or board members, with the caveat that it does not capture whether growth is accelerating or decelerating.

Example 3, Negative growth (depreciation)

A commercial property was purchased for £450,000 in 2018 and recently appraised at £385,000 in 2026 (8 years later).

CAGR = ((385,000 / 450,000)^(1/8) - 1) x 100 = (0.8556^0.125 - 1) x 100 = (0.9825 - 1) x 100 = -1.75% per year

The property has been losing value at roughly 1.75% annually, or about 13.4% cumulative over 8 years. This is consistent with a poorly-located or over-geared asset in a weak local market, and the CAGR makes the deterioration rate immediately comparable to alternative investments.

Example 4, Reverse projection

You have £50,000 today and want to know what it will be worth in 15 years at a 6% CAGR:

Future Value = 50,000 x (1.06)^15 ≈ £119,656

At a 6% CAGR, your £50,000 nearly doubles-and-a-halves in 15 years. Compare that with a 10% CAGR over the same period:

Future Value = 50,000 x (1.10)^15 ≈ £208,862

The difference between a 6% and a 10% CAGR, compounded over 15 years, is nearly £90,000 on a £50,000 starting balance. This is why investment managers obsess over even small differences in long-term CAGR, they compound dramatically.

Common Mistakes When Using CAGR

Mistake 1: Using CAGR when there are cash flows in or out. CAGR assumes a single lump-sum investment at the start and a single lump-sum value at the end. If you added money along the way or withdrew dividends, CAGR overstates the true return. For those cases, use IRR (Internal Rate of Return) or XIRR (for irregular dates) instead.

Mistake 2: Comparing short-period CAGRs as if they were annual rates. A fund that gained 15% in 6 months is not a "30% annual" investment, that figure would only hold if the next 6 months repeated the same performance, which is unlikely. Always specify the period the CAGR covers.

Mistake 3: Treating CAGR as a forecast. Past CAGR is a description of what happened, not a prediction of what will happen. The S&P 500 has returned ~10% CAGR over the last century, but no individual 30-year period has returned exactly 10%, and no individual year looks like 10%.

Mistake 4: Ignoring volatility. Two investments can have identical CAGRs but very different risk profiles, one might be a steady 8% per year while another swings between +40% and -30%. CAGR hides the journey; standard deviation or maximum drawdown are better measures of risk.

Mistake 5: Annualising periods shorter than 3 years. CAGR over 12 months is just the same as the 1-year return; annualising doesn't add information. For sub-3-year periods, simple total return is usually more honest.

What CAGR Does and Does Not Tell You

CAGR is powerful because it allows direct comparison of growth across investments, time periods, and asset classes, all on the same annual basis. A property that doubled in value over 10 years has a CAGR of approximately 7.2%. A stock that grew from £100 to £280 in 5 years has a CAGR of approximately 22.8%. These figures are immediately comparable.

However, CAGR masks volatility. Two portfolios with identical CAGRs can have dramatically different risk profiles, one growing steadily and one swinging wildly. CAGR also does not account for cash flows in or out, which is why IRR (Internal Rate of Return) is more appropriate when money is added or withdrawn during the period. Use CAGR for clean start-to-finish comparisons; use IRR for complex cash flow scenarios.

When to Use CAGR vs Other Growth Metrics

Frequently Asked Questions

What is a good CAGR for an investment? It depends on the asset class and time period. UK and US equity index funds have historically delivered a CAGR of roughly 7 to 10% over long periods (before inflation). Cash savings rarely exceed 4 to 5%. High-growth technology stocks or private equity may target 15 to 20%+, with correspondingly higher risk. Real estate typically returns 3 to 6% CAGR over the long term, with gearing amplifying both gains and losses. Compare your investment's CAGR to a relevant benchmark (such as a broad market index for that asset class) rather than an arbitrary target.

How is CAGR different from average annual return? Average annual return (simple average) adds up each year's return and divides by the number of years. CAGR uses geometric compounding, which accounts for the sequence of returns and the compounding effect. For volatile investments, the simple average is almost always higher than the CAGR. For example, an investment that gains 50% one year and loses 50% the next has an average return of 0%, but a CAGR of -13.4%, because the end value is only £75 out of £100 invested.

Can CAGR be negative? Yes. If the ending value is less than the starting value, the CAGR is negative, indicating a net loss over the period. For example, if an investment fell from £10,000 to £7,200 over 4 years, the CAGR is ((7,200/10,000)^(1/4) - 1) x 100 = approximately -7.9% per year. Negative CAGR is useful for tracking depreciation, business decline, or asset value erosion over time.

How do I use CAGR to compare business revenue growth? Enter your company's revenue from the first year as the starting value and the most recent year as the ending value, with the number of years in between. The resulting CAGR is a clean metric for comparing growth rate against competitors, industry benchmarks, or investor targets. Most venture-backed growth companies target a revenue CAGR of 20% or higher; established businesses may consider 5 to 10% a healthy rate. Combine with ARR growth and net revenue retention for a fuller picture.

Why does CAGR differ from my actual portfolio return? If you added money to or withdrew money from your portfolio during the period, CAGR does not accurately reflect your personal return because it assumes a single lump-sum investment. Use XIRR (a date-aware IRR calculation available in Excel, Google Sheets, and most portfolio trackers) to get a more accurate personal return. CAGR is for the asset, not for your specific activity in it.

Does CAGR account for inflation? No. CAGR is a nominal (pre-inflation) figure. To get a real (post-inflation) growth rate, subtract the inflation rate using the Fisher equation: (1 + nominal) / (1 + inflation) - 1. For example, a 10% CAGR with 3% inflation is a real CAGR of approximately 6.8%. Always check whether a quoted growth rate is nominal or real before comparing it to other figures.

Also try these free tools related to CAGR Calculator: - Investment Calculator

• ROI Calculator
• IRR Calculator