CAGR (Compound Annual Growth Rate) is the mean annual growth rate of an investment or metric over a specified period longer than one year. It represents the rate at which an investment would have grown if it had grown at the same rate every year.

How do you calculate CAGR?

The CAGR formula is: CAGR = (Ending Value / Beginning Value)^(1/n) - 1, where n is the number of years. For example, if an investment grew from $1,000 to $2,000 over 5 years, the CAGR would be (2000/1000)^(1/5) - 1 = 14.87%.

A 'good' CAGR depends on context. For the S&P 500, the historical CAGR is around 10%. For startups, investors often look for 20-50%+ growth. For mature companies, 5-15% is often considered solid. Industry benchmarks and risk levels should inform what constitutes good performance.

Why do consultants use CAGR in presentations?

Consultants use CAGR because it smooths out volatility and provides a single, easy-to-understand growth rate. It's commonly displayed on waterfall charts and bar charts to show compound growth over time. CAGR lines are a standard feature in consulting presentations at firms like McKinsey, BCG, and Bain.

What is CAGR (Compound Annual Growth Rate)?

CAGR is the mean annual growth rate of an investment or metric over a specified period longer than one year. Unlike simple average growth, CAGR accounts for compounding effects, giving you the smooth rate at which an investment would have grown if it had grown at the same rate every year. It's the standard metric used by consultants, analysts, and investors to compare growth across different time periods and investments.

How do you calculate CAGR?

The CAGR formula is: CAGR = (Ending Value / Beginning Value)^(1/n) - 1, where n is the number of periods (usually years). For example, if revenue grew from $100M to $150M over 3 years, the CAGR would be (150/100)^(1/3) - 1 = 14.47%. This means the revenue grew at an equivalent rate of 14.47% each year.

What is a good CAGR for a company?

A 'good' CAGR depends heavily on context. For the S&P 500, the historical CAGR is approximately 10%. High-growth startups often target 50-100%+ CAGR. Mature companies in stable industries might see 3-8% as healthy. SaaS companies are often valued based on 20-40% revenue CAGR. Always compare against industry benchmarks and consider the risk profile.

Why do consultants use CAGR in presentations?

Consultants at firms like McKinsey, BCG, and Bain use CAGR because it communicates growth in a single, comparable number. It smooths out year-over-year volatility and allows for easy comparison across different time periods or companies. CAGR lines are a standard feature in waterfall charts and bar charts to show compound growth trends over time.

What's the difference between CAGR and average growth rate?

CAGR accounts for compounding, while simple average growth rate does not. If an investment doubles (+100%) then halves (-50%), the average growth rate is +25%, but the actual ending value equals the starting value (0% real return). CAGR would correctly show 0% because it calculates based on actual beginning and ending values, not intermediate changes.

Can CAGR be negative?

Yes, CAGR can be negative when the ending value is lower than the beginning value. This indicates a decline over the period measured. For example, if revenue dropped from $200M to $150M over 2 years, the CAGR would be (150/200)^(1/2) - 1 = -13.4%, meaning revenue declined at an equivalent rate of 13.4% per year.

How do I show CAGR on a PowerPoint chart?

CAGR is typically displayed as a line or annotation on bar charts and waterfall charts. In consulting presentations, it's shown as a diagonal line from the first bar to the last bar with the percentage labeled. Tools like Deckary and Think-Cell can automatically calculate and display CAGR lines on your charts with proper formatting.

What periods can I use for CAGR?

While CAGR stands for Compound Annual Growth Rate, the formula works for any consistent time period. You can calculate quarterly, monthly, or even daily compound growth rates. Just ensure your 'n' value matches the number of periods. For monthly data over 24 months, n=24. The result will be the compound monthly growth rate.

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CAGR Calculator

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Calculate Compound Annual Growth Rate instantly. The standard metric used by consultants, analysts, and investors to measure growth.

Beginning Value

Ending Value

Number of Years

CAGR Formula: (Ending Value / Beginning Value)^1/n - 1

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What is CAGR?

CAGR (Compound Annual Growth Rate) is the rate of return that would be required for an investment to grow from its beginning value to its ending value, assuming profits are reinvested at the end of each period.

Unlike simple average returns, CAGR smooths out volatility and gives you a single percentage that represents consistent year-over-year growth. This makes it the go-to metric for:

Comparing investment performance across different time periods
Measuring company revenue or profit growth
Setting growth targets and forecasting
Benchmarking against industry standards

Example CAGR Calculation

A company's revenue grows from $10M to $25M over 5 years:

CAGR = (25,000,000 / 10,000,000)^1/5 - 1

CAGR = (2.5)^0.2 - 1

CAGR = 1.2011 - 1

CAGR = 20.11%

This means the revenue grew at an equivalent rate of 20.11% each year over the 5-year period.

When to Use CAGR

CAGR is the standard growth metric in consulting, finance, and business strategy

Revenue Growth Analysis

Show how revenue grew over multiple years on waterfall charts and bar charts. CAGR lines are standard in consulting presentations.

Investment Returns

Compare portfolio performance across different time periods. CAGR normalizes returns so you can compare a 3-year investment to a 10-year one.

Market Sizing & TAM

Project future market size using historical CAGR. Essential for TAM/SAM/SOM slides in pitch decks and strategy presentations.

Financial Forecasting

Build financial projections by applying CAGR to historical data. Used in financial projections slides and business plans.

CAGR Benchmarks by Industry

Context	Typical CAGR	Notes
S&P 500 (Historical)	~10%	Long-term average including dividends
High-Growth SaaS	20-50%	ARR growth for venture-backed companies
Mature Tech	10-20%	Large cap tech companies
Consumer Goods	3-8%	Established CPG brands
Real Estate	4-7%	Property value appreciation
Early-Stage Startups	50-100%+	VC expectations for portfolio companies

How to Calculate CAGR in Excel

While this calculator provides instant results, you may need to calculate CAGR directly in Excel for financial models or presentations. Excel offers several methods:

Method 1: Manual CAGR Formula

The most transparent approach—shows exactly how CAGR is calculated:

=((B2/B1)^(1/A2))-1

Where B2 = Ending Value, B1 = Beginning Value, A2 = Number of Years

Method 2: RRI Function (Excel 2013+)

The RRI function calculates equivalent interest rate for growth:

=RRI(nper, pv, fv)

Example: =RRI(5, 1000, 2500) returns 20.11% for $1,000 growing to $2,500 over 5 years

Method 3: RATE Function

Originally for loan calculations, but works for CAGR with no periodic payments:

=RATE(nper, 0, -pv, fv)

Note: The present value (pv) must be negative for proper calculation

Pro Tip: Excel vs. Presentation

Calculate CAGR in Excel for your analysis, but use a tool like Deckary to display CAGR lines on bar charts and waterfall charts in PowerPoint. Manual annotation in PowerPoint is time-consuming and error-prone when data changes.

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Frequently Asked Questions

Everything you need to know about CAGR calculations

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