Work out the compound annual growth rate between a starting and ending value over any number of years.
Compound annual growth rate
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| Year | Value at that rate |
|---|
CAGR = (ending value ÷ starting value)1 ÷ years − 1
An investment grows from 10,000 to 18,000 in 5 years. 18,000 ÷ 10,000 = 1.8; 1.81/5 = 1.1247, so the CAGR is 12.47% a year, even though the total gain is 80%.
Compound annual growth rate: the steady yearly rate that would take a value from where it started to where it ended, if it had grown by the same percentage every year. Real growth goes up and down; CAGR smooths it into one number you can compare.
Because growth compounds. Doubling in 5 years is 100% in total, but 20% a year would give 149%. The steady rate that doubles in 5 years is 14.87% a year.
Yes: revenue, users, prices, population, anything measured at a start and an end. Partial years work too, such as 2.5 years.
The value shrank. A CAGR of −10% means it lost about a tenth of its value each year on average.
