CAGR calculator

Compound annual growth rate is the constant rate that would have carried something from where it started to where it ended. Revenue that went from $100m to $200m over three years grew at 26% a year compounded, not at 33% a year, because each year's growth builds on the last.

It is a smoothing device. Real revenue does not grow at a constant rate, and the CAGR deliberately hides the path taken so two companies can be compared on the same basis.

That smoothing is the whole point and also the whole risk. A steady 26% and a violent sequence averaging 26% produce the same number, and they are not the same business.

CAGR = (ending / beginning)^(1 / years) - 1

Revenue of $100m in 2021 and $200m in 2024.

1. 1That is three years of growth, not four. Count the gaps between the figures, not the figures.
2. 2200 / 100 = 2.
3. 32^(1/3) = 1.2599.

• Compare like periods. A CAGR measured from a trough will flatter any business, and one measured from a peak will bury it.
• Use it alongside the underlying series, never instead of it. If the yearly figures are volatile, say so rather than letting one number imply they were not.
• For a valuation input, a longer window is usually more honest than a shorter one, because it is harder to pick endpoints that suit the story.

• Counting years wrong. From 2021 to 2024 is three years of growth. Using four understates the rate.
• Computing a CAGR across a sign change. There is no constant rate that takes a loss of $50m to a profit of $200m, and any number produced is meaningless. This calculator refuses rather than inventing one.
• Presenting a CAGR from a deliberately chosen starting year. Moving the start by twelve months can change the answer enormously, which is exactly why it gets moved.

What each of these inputs actually is, where it comes from in a filing, and where it misleads.