CAGR Calculator

Average annual return is the arithmetic mean of yearly returns, which can be misleading. CAGR accounts for compounding and gives the geometric mean — the rate that actually produces the observed growth. CAGR is always lower than or equal to the arithmetic average.

The S&P 500 has historically delivered about 10% CAGR including dividends. A CAGR of 15-20% is considered excellent for individual stocks. Growth companies may achieve 25%+ CAGR during expansion phases.

Yes, if the ending value is less than the beginning value, CAGR will be negative, indicating the investment lost value over the period. For example, going from $10,000 to $7,000 in 3 years gives a CAGR of -11.2%.

CAGR provides a standardized way to compare investment returns across different time periods and asset classes. It smooths out volatility and gives a clear picture of annualized performance.

CAGR accounts for dividends only if they are included in the ending value (total return). If you use price-only values, dividends are excluded. Always specify whether CAGR is price-return or total-return.

CAGR does not show volatility, risk, or the path of returns. Two investments with the same CAGR can have very different risk profiles. It also ignores intermediate cash flows (additional investments or withdrawals).

CAGR is commonly used to measure revenue growth, earnings growth, customer growth, and market share expansion over time. It provides a clearer picture than year-over-year comparisons when growth is uneven.

CAGR is the annualized equivalent of total return. If CAGR is r and time is t years, total return = (1+r)^t - 1. They represent the same growth measured differently.

Yes. CAGR works for any quantity that grows over time — population, website traffic, sales volume, etc. The formula is the same: (End/Start)^(1/years) - 1.