Do you need to calculate the annual or monthly return of an asset or investment over multiple periods? We have you covered with our easy-to-use Compound Annual Growth Rate (CAGR) calculator.
Simply add your starting value and end value as well as the number of periods below and our calculator will give you the result instantly.
How To Use The CAGR Calculator
To use the calculator you will need 3 values:
Starting Value – This is your initial starting value. For example, if you’re calculating the CAGR of an investment you purchased, this would be the value of it you initially purchased.
Ending Value – This is the end value. In our investment analogy, this would be the price your investment is worth at the end period.
Number of Periods – This is the number of periods your value has been growing. If you’re calculating the CAGR of an investment for the past 3 years, your value would be three. If you want to calculate a monthly growth rate, you can also put months in this field.
Simply enter these values and our calculator will automatically calculate your CAGR for you.
CAGR Formula
The formula for CAGR is:
CAGR = ( EV / SV)1 / n – 1
where:
EV = Investment’s ending value
SV = Investment’s starting value
n = Number of investment periods (months, years, etc.)
What Is Compound Annual Growth Rate (CAGR)?
Compound Annual Growth Rate (CAGR) is the average rate at which some value (investment, business revenue) grows over a set period of time assuming the value has grown in that time frame.
When Is CAGR Used?
There are a wide range of uses for compound annual growth rate however one of the most common places you will find it used is in finance. CAGR is regularly used when analyzing stocks to invest in.
We can use CAGR to calculate the average growth rate over a set period of time. We can then compare the two companies side by side and use that information to make our investing decisions.
If you have a business you may use CAGR to calculate your average growth rate over a set period of time such as 5 years. For example, if revenue went from £20,000 per year 5 years ago to £100,000 today you would have an average annual growth rate of 37.97% per year.
Limitations Of CAGR
CAGR gives us an average and does not account for volatility. Some of the periods could have had negative growth but we can’t see that using this calculation. It’s only showing us the average growth rate of the set periods.
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