CAGR

The compound annual growth rate (CAGR) is the rate of return (RoR) that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each period of the investment’s life span.

• The compounded annual growth rate (CAGR) is one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.
• It measures a smoothed rate of return.
• Investors can compare the CAGR of two or more alternatives to evaluate how well one stock performed against other stocks in a peer group or a market index.
• CAGR is thus a good way to evaluate how different investments have performed over time, or against a benchmark.
• The CAGR does not, however, reflect investment risk.

― Compound Annual Growth Rate (CAGR) Formula and Calculation