CAGR Calculator: Compound Annual Growth Rate Formula

A CAGR calculator helps estimate the annualized growth rate between a starting value and an ending value over a period of time. It is useful when you want to understand the smoothed yearly return of an investment, business metric, revenue number, or portfolio value.

Use the CAGR Calculator to enter the starting value, ending value, and duration.

What is CAGR?

CAGR stands for Compound Annual Growth Rate.

It answers a simple question:

If something grew from the starting value to the ending value over a fixed number of years, what constant annual growth rate would produce the same result?

For example:

• Starting value: Rs 5,00,000
• Ending value: Rs 10,00,000
• Duration: 5 years

CAGR converts that full-period growth into a yearly rate.

CAGR formula

The formula is:

CAGR = [(ending value / starting value) ^ (1 / years) - 1] x 100

The calculator also shows:

• Absolute gain = ending value - starting value
• Absolute return = absolute gain / starting value x 100
• Growth multiple = ending value / starting value

CAGR vs absolute return

Absolute return tells you the total percentage return over the full period.

CAGR tells you the annualized rate needed to reach the same ending value.

For long durations, CAGR is usually more useful than absolute return because it adjusts for time.

When CAGR is useful

CAGR can be useful for:

• Comparing investments over the same or different periods
• Understanding portfolio growth
• Comparing business revenue growth
• Evaluating long-term compounding
• Explaining historical growth in a simple annualized format

It is especially useful when there is one starting value, one ending value, and no additional cash flows in between.

When CAGR is not enough

CAGR does not show volatility. It also does not handle multiple irregular deposits or withdrawals well.

If there are multiple investment dates, withdrawals, SIPs, dividends, or irregular cash flows, XIRR is usually more appropriate than CAGR.

For future-value planning, try the Lumpsum Calculator, SIP Calculator, or Goal SIP Calculator.

Assumptions to remember

Assumptions:

• Starting value is greater than zero.
• Duration is greater than zero.
• CAGR smooths growth into a constant annual rate.
• It does not show year-by-year ups and downs.
• It does not include taxes, fees, inflation, or cash-flow timing.

Final thought

A CAGR calculator is helpful when you want a quick annualized return number from start value, end value, and years. Use the CAGR Calculator for historical growth, and use SIP or Lumpsum calculators when planning future investment scenarios.

Disclaimer: This guide is for general informational and educational purposes only. It is not investment, tax, legal, accounting, or financial advice. Investment returns are not guaranteed and can vary based on market conditions and product selection.