Compound Annual Growth Rate (CAGR)

What is the Compound Annual Growth Rate (CAGR)?

The Compound Annual Growth Rate (CAGR) is a measure of a company, asset, or investment's performance expressed as an annualized percentage growth rate over a specified period.

By using the geometric mean rather than a simple arithmetic average, CAGR provides an average annual growth rate that smooths out the fluctuations of individual years. It tells you the single, steady rate at which an investment would have grown if it had grown at the same rate every year from the starting value to the ending value.

CAGR is widely used by investors and analysts to compare the performance of investments, evaluate company growth, and benchmark portfolios against indices like the S&P 500.

CAGR Calculator

Calculate the compound annual growth rate for any investment or metric:

CAGR Calculator

Frequently Asked Questions

What is a good CAGR?
A good CAGR depends on the context. For stock market investments, a CAGR of 7-10% is generally considered strong, as it roughly matches the historical average return of the S&P 500. For individual companies, a revenue CAGR above 15-20% is considered high growth.
What is the difference between CAGR and average annual return?
A simple average return just averages each year's return, which can be misleading with volatile returns. CAGR uses the geometric mean, accounting for compounding, and gives you the single growth rate that would get you from the starting value to the ending value over the same period.
Can CAGR be negative?
Yes. CAGR is negative when the ending value is lower than the starting value, indicating that the investment or metric declined over the measured period.
What are the limitations of CAGR?
CAGR only considers the starting and ending values, ignoring volatility and interim cash flows. It assumes smooth growth, which may not reflect reality. It also cannot account for risk, making it important to use alongside other metrics like standard deviation or the Sharpe ratio.
How to calculate CAGR in Excel or Google Sheets?
Use the formula: =(Ending/Starting)^(1/Years)-1. For example, if A1=10000 (starting value), A2=25000 (ending value), and A3=10 (years), use =(A2/A1)^(1/A3)-1. Format the result as a percentage. Alternatively, use the RATE function: =RATE(years, 0, -starting, ending).
What is the CAGR of the S&P 500?
The S&P 500 has delivered a CAGR of approximately 10% over the last 50+ years (including dividends). Adjusted for inflation, the real CAGR is closer to 7%. Over shorter periods, the CAGR varies significantly: some decades delivered 15%+ while others delivered below 5%.
Romain Simon
Written by Romain Simon

Founder of Beanvest. Self-directed investor since 2015, building tools to help individual investors make better decisions.

Last updated: February 26, 2026| Editorial process
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