What is the CAGR formula?

CAGR = (ending value ÷ beginning value)1/t − 1, where t is the number of years.

How do I calculate CAGR in Excel?

=(EV/BV)^(1/years)−1, or =RRI(years, BV, EV).

Why is CAGR lower than average annual growth?

Because it accounts for compounding. The simple average of yearly growth rates overstates the true growth when returns vary.

Can I use CAGR for periods shorter than a year?

You can, but annualizing very short periods can produce misleadingly large numbers.

CAGR Formula and Calculator

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CAGR Calculator (Compound Annual Growth Rate)

The compound annual growth rate is the constant yearly rate that would take a value from its beginning level to its ending level over a given number of years. It smooths out the ups and downs in between, which makes it the standard way to report the growth of an investment, a company’s revenue, a user base or a market over several years.

Formula

CAGR = (EVBV)^1/t − 1

Where

CAGR: compound annual growth rate
EV: ending value
BV: beginning value
t: number of years between the two values

Calculator

Beginning value (BV)

Ending value (EV)

Years (t)

Result and step-by-step solution

CAGR

14.29%

Total growth 95% over 5 years, the same as a steady 14.29% a year.

Growth multiple
19,500.0010,000.00 = 1.95
Take the t-th root
1.95^1/5 = 1.14289655
Subtract 1
CAGR = 1.14289655 − 1 = 14.2897%

How to use the formula

The formula divides the ending value by the beginning value to get the total growth multiple, takes the t-th root to turn that into a per-year multiple and subtracts 1. The number of years can be fractional, so you can use 2.5 for thirty months.

In the example, 10,000 grows to 19,500 in 5 years. The total growth is 95%, but the CAGR is 14.29% a year, because each year’s growth compounds on the last. Dividing 95% by 5 would overstate it at 19%. CAGR is exactly the annualized ROI, and it is the geometric mean return when you know yearly returns instead of just the end points. It says nothing about volatility along the way.

Frequently asked questions

What is the CAGR formula?: CAGR = (ending value ÷ beginning value)^1/t − 1, where t is the number of years.
How do I calculate CAGR in Excel?: =(EV/BV)^(1/years)−1, or =RRI(years, BV, EV).
Why is CAGR lower than average annual growth?: Because it accounts for compounding. The simple average of yearly growth rates overstates the true growth when returns vary.
Can I use CAGR for periods shorter than a year?: You can, but annualizing very short periods can produce misleadingly large numbers.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.