CAGR Formula: How to Calculate Compound Annual Growth Rate

Published October 11, 2026

Free tool: CAGR Calculator→

The compound annual growth rate, or CAGR, turns growth over several years into one steady yearly rate. If an investment went from $10,000 to $19,000 in five years, its CAGR tells you the constant annual return that would have produced the same result, which makes it easy to compare investments, companies or any figures that grow over time. This guide explains the formula and how to use the free CAGR Calculator.

The CAGR formula

CAGR = (ending value ÷ beginning value)^(1 ÷ years) − 1

Example: $10,000 grew to $19,000 over 5 years:

• Growth multiple: 19,000 ÷ 10,000 = 1.9
• CAGR: 1.9^(1 ÷ 5) − 1 = 13.70% a year
• Check: 10,000 × 1.137^5 ≈ 19,000

The total return was 90%, but CAGR says it was like earning 13.70% every single year.

Why not just divide by the number of years?

Dividing the 90% total return by 5 gives an average of 18% a year, which overstates the growth because it ignores compounding: 18% a year for 5 years would turn $10,000 into almost $22,900, not $19,000. CAGR is the rate that actually fits.

The same problem hits averages of yearly returns. A gain of 50% followed by a loss of 50% averages 0%, but $100 becomes $150 and then $75: a 25% loss. CAGR, also called the geometric mean return, gets this right. The Average Return Calculator compares the two from a list of yearly returns.

Working backwards

The same formula, rearranged, answers two more questions:

• What will it grow to? Ending value = beginning value × (1 + CAGR)^years. $10,000 growing at 8% for 10 years becomes $21,589.25.
• How long to reach a target? Years = ln(target ÷ start) ÷ ln(1 + CAGR). At 8%, $10,000 takes about 9 years to double to $20,000.

Comparing with a benchmark

CAGR is most useful next to a comparison. The $10,000 that grew to $19,000 at 13.70% a year easily beat a 7% benchmark, which would have produced only $14,025.52 over the same 5 years. Common benchmarks are a broad stock index fund, inflation or a savings rate.

How to use the CAGR Calculator

1. Open the CAGR Calculator.
2. Choose a mode: Find CAGR, Find ending value or Find time to target.
3. Enter the numbers: the beginning value, the ending (or target) value, the period in years (decimals are fine) or the growth rate, depending on the mode.
4. Add a benchmark rate to compare against.
5. Read the results: the CAGR, the total return, the simple average return for contrast, and the doubling time at that rate. A chart compares the compound growth path with straight-line growth and the benchmark.

Limits of CAGR

CAGR smooths over the journey: an investment that rose steadily and one that crashed and recovered can have the same CAGR. It also ignores money added or withdrawn along the way. For investments with deposits and withdrawals, the IRR Calculator measures the return more fairly.

Frequently asked questions

How do I calculate CAGR?

Divide the ending value by the beginning value, raise the result to the power of 1 divided by the number of years, and subtract 1. $10,000 to $19,000 in 5 years gives a CAGR of 13.70%.

Is CAGR the same as annualized return?

Yes, for a single investment with no money added or taken out. Both describe the constant yearly rate that turns the starting value into the ending value.

What is a good CAGR?

It depends on what you're measuring. For investments, compare it with a relevant benchmark such as a stock index over the same period; for a business, with its industry's growth.