How to Calculate Compound Annual Growth Rate “CAGR” in Excel?

In this article, you will learn what is CAGR and how to calculate the same in Excel

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What is Compound Annual Growth Rate - CAGR?

Compound Annual Growth Rate (CAGR) is a measure of the average rate at which an investment grows over time, assuming that the investment has been compounding at a steady rate each year. It is a useful tool for calculating the annualized growth rate of an investment over a period of time, and for comparing the performance of different investments.

The CAGR formula takes into account the initial value of the investment, the final value of the investment, and the number of years over which the investment has grown. 

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How to Compute CAGR in Excel?

CAGR is calculated as follows:

CAGR = (Final value / Initial value) ^ (1 / Number of years) - 1

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For example, if you invest $1,000 in a stock that grows to $1,500 over a period of 5 years, the CAGR would be:

CAGR = ($1,500 / $1,000) ^ (1/5) - 1 = 8.14%

This means that the investment grew at an average rate of 8.14% per year over the 5-year period.

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See below for how to calculate the same in Excel:

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You can use the CAGR to see the revenue growth in a certain period in historical data or a projected period in your business plan and compare it with your competitors.

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