Quick Definition

Compound Annual Growth Rate (CAGR) is a measure used to express the mean annual growth rate of an investment over a specified time period longer than one year.

Formula

Examples

• 1If an investment grows from $1,000 to $1,500 over three years, the CAGR would be used to calculate the average annual growth rate.
• 2A company's revenue increased from $200 million to $300 million over five years. Using CAGR, one can determine the average growth rate per year.
• 3CAGR can be used to compare the performance of different investments over the same period, even if their values fluctuate significantly year over year.

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