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## Compounded annual growth rate - CAGR |

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Reuters
Apr 10
Comment

India's fuel demand fell 0.6 percent in March compared with the same month last year.

The Economic Times
Feb 14
Comment

Last month, wholesale food prices fell 0.56 per cent year-on-year, compared with a provisional 0.70 per cent fall in December.

The Times of India
Dec 14
Comment

The data compared with a 3.10 percent annual rise forecast by economists in a Reuters poll. In October, prices rose a provisional 3.39 percent.

Reuters
Dec 13
Comment

India's fuel demand rose 12.1 percent in November compared with the same month last year.

Reuters
Nov 15
Comment

India's wholesale prices rose at a slower-than-expected pace in October, gaining 3.39 percent from a year earlier, government data showed on Tuesday.

Reuters
Nov 10
Comment

India's fuel demand rose 8.1 percent in October compared with the same month last year.

TechCrunch
Nov 4
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Are smartwatch sales tanking? Analysts are divided. A recent IDC report suggested the total shipment of smartwatches had plummeted by 50 percent in the last year, but this week rival analyst firm Canalys claimed that sales have actually...

Automotive World
Oct 27
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Volvo Car Group, the premium car maker, has reported third quarter operating profit of SEK2,067m compared to SEK1,276m in the same period last year and a year-on-year increase in revenue to SEK41,1bn from SEK36.1bn previously. The operating margin...

newratings.com
Oct 21
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Hypoport AG: Results for January to September - sharp year-on-year rise in
earnings
Hypoport AG / Key word(s): 9-month figures
21.10.2016 15:48
Disclosure of an inside information according to Article 17 MAR,
transmitted by DGAP - a service of...

The Economic Times
Oct 10
Comment

Economists surveyed by Reuters had forecast a 0.2 per cent annual fall in output compared with a revised 2.5 per cent year-on-year decline in July.

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This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |

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The compound annual growth rate (CAGR) is the rate at which something (e.g., revenue, savings, population) grows over a period of years, taking into account the effect of annual compounding.

A compound is composed of two or more parts. In the case of compound growth, the two parts are principal and the amount of change in the principal over a certain time period, which is called “interest” in some circumstances.

This is sometimes called “growth on growth” because it measures periodic growth of a value that is itself growing periodically. If we are calculating the annual compound growth rate, then each year the new basis is the previous basis plus the growth over the previous period.

In looking at an investment, the CAGR is a measure that is commonly used to show how quickly the investment, or certain aspects of it, such as gross sales, have been growing. Investment analysts often look at five-year periods to discern a trend. A specific company’s rate of growth is often then compared with that of competitors or with the industry as a whole.

For example, Company A had a revenue CAGR of 8.5% over the past five years. One of its direct competitors has grown by 9.4% and two others have seen slower growth. The industry as a whole has seen revenues grow by 7.3% per year, compounded annually. On this basis one would conclude that Company A is doing well and in fact might be gaining market share. Of course, other factors need to be looked at, such as debt and the outlook for the industry.

The formula for compound annual growth rate is:

*((Ending Value/Beginning Value)^(1/# of Years))-1*

(A financial calculator may be useful for performing this calculation.)

There are five variables in a compound growth rate calculation:

- Beginning value
- Ending value
- Length of time between the values
- Periodic scale (days?, months? years?)
- Periodic rate of change

You need to know four of these values to make the calculation of the fifth.

For example, Company A had revenues of $1.35 billion in 2002. Revenues grew by a CAGR of 8.5% through 2007, a period of five years. We know the beginning value, the length of time, the periodic scale (years) and the periodic rate of change. Now we can determine what the revenue was in 2007.

**Average annual change** is not to be confused with compound annual change. Average annual change is simply the growth rate over a period, say 50% over ten years, divided by the number of years, which yields 5.0% in this case. That is higher than the CAGR, which is 4.1%.

**Compound interest.** Useful when there is a set interest rate, as in a savings account. The interest rate is applied to the beginning principal and also to all accumulated interest. Sometimes there is an annual interest rate *compounded monthly*. Say you deposit $10,000 at an annual interest rate of 12% (you wish!), compounded monthly. At the end of the first month your $10,000 has grown by 1.0% (12%/12), or $100. During the next month the basis is $10,100 and it grows another 1%, or $101, making the balance $10, 201. At the end of one year the balance grows to $11,268. Compare that with $10,000 invested at a *simple annual interest* rate of 12%, which yields $11,120, which is $148 less.

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