CAGR
Compound Annual Growth Rate
In one sentenceThe steady yearly growth rate that would take a number from its starting value to its ending value over several years.
What it means
Real growth is bumpy. CAGR smooths it into one average annual rate, which makes it easy to compare companies, markets or investments over time.
How to use it
- Use CAGR when you talk about growth over 3 or more years, and YoY for a single year.
FormulaCAGR = (ending value ÷ starting value)^(1 ÷ number of years) − 1
Example: $1M to $2M over 3 years: (2)^(1/3) − 1 ≈ 26% a year
Example: $1M to $2M over 3 years: (2)^(1/3) − 1 ≈ 26% a year
Related terms
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