IT Glossary

Compound Annual Growth Rate (CAGR)

cagr | compound annual growth rateThe compound annual growth rate (CAGR) is the annualized average rate of revenue growth between two given years, assuming growth takes place at an exponentially compounded rate. The CAGR between given years X and Z, where Z – X = N, is the number of years between the two given years, is calculated as follows:

CAGR, year X to year Z = [(value in year Z/value in year X) ^ (1/N)-1]

For example, the CAGR for 2006 to 2011 is calculated as:

CAGR, 2006 to 2011 (X = 2006, Z = 2011, N = 5) = [(value in 2011/value in 2006) ^ (1/5)-1]

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