Compound Annual Growth Rate Calculator

Compound Annual Growth Rate (CAGR) Calculator

function calculateCAGR() { var initialValue = parseFloat(document.getElementById("initialValue").value); var finalValue = parseFloat(document.getElementById("finalValue").value); var numYears = parseFloat(document.getElementById("numYears").value); var resultDiv = document.getElementById("cagrResult"); if (isNaN(initialValue) || isNaN(finalValue) || isNaN(numYears) || initialValue <= 0 || numYears <= 0) { resultDiv.innerHTML = "Please enter valid positive numbers for all fields."; return; } if (initialValue === 0 && finalValue !== 0) { resultDiv.innerHTML = "CAGR cannot be calculated when the starting value is zero and ending value is not zero."; return; } if (initialValue === 0 && finalValue === 0) { resultDiv.innerHTML = "CAGR is undefined when both starting and ending values are zero."; return; } var cagr = (Math.pow((finalValue / initialValue), (1 / numYears)) – 1) * 100; if (!isFinite(cagr)) { resultDiv.innerHTML = "CAGR calculation resulted in an invalid number. Please check your inputs."; return; } resultDiv.innerHTML = "Compound Annual Growth Rate (CAGR): " + cagr.toFixed(2) + "%"; }

Understanding the Compound Annual Growth Rate (CAGR)

The Compound Annual Growth Rate (CAGR) is a useful metric for evaluating the growth of an investment or business over multiple periods. Unlike simple annual growth, CAGR smooths out volatility by assuming that the growth rate was constant over the specified period, compounded annually.

What is CAGR?

CAGR represents the average annual rate at which an investment or value has grown over a specified period, assuming the profits were reinvested at the end of each year. It provides a more accurate picture of growth than a simple average, especially when performance fluctuates significantly from year to year.

Why is CAGR Important?

• Investment Performance: It helps investors compare the performance of different investments over varying time horizons.
• Business Growth: Companies use CAGR to track the growth of revenue, market share, or other key metrics over several years.
• Forecasting: While based on historical data, it can be a basis for future growth projections.
• Smoothing Volatility: It provides a single, consistent growth rate, making it easier to understand long-term trends.

How to Use This Calculator

Our CAGR calculator simplifies the process of finding this crucial metric:

1. Starting Value: Enter the initial value of your investment, revenue, or any other metric you want to analyze. This is the value at the beginning of your period.
2. Ending Value: Input the final value of your investment or metric at the end of the period.
3. Number of Years: Specify the total number of years (or periods) over which the growth occurred.
4. Click "Calculate CAGR" to instantly see the compound annual growth rate.

Example Calculation:

Let's say you invested $10,000 in a stock five years ago, and its current value is $18,000. To find the CAGR:

• Starting Value: $10,000
• Ending Value: $18,000
• Number of Years: 5

Using the formula: CAGR = ((Ending Value / Starting Value)^(1 / Number of Years)) - 1

CAGR = (($18,000 / $10,000)^(1 / 5)) - 1

CAGR = (1.8^(0.2)) - 1

CAGR = 1.1247 - 1

CAGR = 0.1247 or 12.47%

This means your investment grew at an average annual rate of 12.47% over the five-year period.