CAGR Calculator
Compound Annual Growth Rate (CAGR) is the rate at which a value grows from a beginning to an ending value, as if it grew at a steady annual rate. Use "Calculate CAGR" to find the rate from two values, or "Project future value" to forecast where a value will be given a CAGR.
CAGR
Related: Annualised Return · Compound Growth
How the CAGR Calculator works
Compound Annual Growth Rate (CAGR) is the single rate that, applied consistently each year, takes a beginning value to an ending value over a defined period. The formula is: CAGR = (Ending Value / Beginning Value)^(1/years) − 1. This calculator works in two modes: calculate CAGR from two known values, or project a future value by applying a known CAGR forward in time.
CAGR is widely used in UK financial analysis, from evaluating ISA and pension portfolio performance to assessing business revenue growth and property price appreciation. Its key advantage is that it accounts for compounding and irons out the volatility of individual years, giving a single meaningful figure that can be compared across assets, time periods, and industries. When projecting future value, the year-by-year table helps illustrate how even a small CAGR creates significant growth over many years.
Frequently asked questions
What does CAGR mean?
CAGR stands for Compound Annual Growth Rate. It is the rate at which a value — such as an investment, a business's revenue, or any measurable quantity — would need to grow each year to reach its ending value from its beginning value in a given number of years, assuming growth compounds annually. It smooths out year-to-year fluctuations to express a single representative rate of growth.
What is a good CAGR?
What counts as a good CAGR depends on context. For business revenue, a CAGR of 10–20% is often considered strong for an established company. For investments, UK equity markets have historically delivered CAGRs of around 7–9% including dividends over the long run. For cash savings, a CAGR matching or beating inflation (currently around 2–4%) is the minimum target. Higher CAGRs generally require accepting more risk.
How is CAGR different from average annual return?
CAGR and simple average annual return often give different results. If an investment gains 50% in year one and loses 33% in year two, the simple average is +8.5% per year, but the actual CAGR is 0% because you are back to where you started. CAGR always reflects the actual compounded outcome, making it a more honest measure of investment performance than a simple arithmetic average of annual returns.
Can CAGR be negative?
Yes, CAGR can be negative if the ending value is lower than the beginning value. A negative CAGR indicates that the investment or business declined in value over the period. For example, if a portfolio fell from £10,000 to £7,000 over 5 years, the CAGR would be approximately -6.9% per year. Negative CAGR is a useful way to quantify the rate of decline in a clear, annualised manner.