cagr calculation excel

What Is CAGR in Excel?

CAGR stands for Compound Annual Growth Rate. It tells you the constant annual rate that would take a starting value to an ending value over a set number of years. In plain terms, it smooths out growth and gives you one easy percentage to compare investments, revenue, portfolio performance, or business metrics.

In Excel, CAGR is usually calculated with a direct formula using beginning value, ending value, and time period.

Standard CAGR Formula

After entering the formula in Excel, format the result cell as a percentage.

Step-by-Step CAGR Calculation in Excel

1) Set up your data

• Cell B2: Beginning Value
• Cell B3: Ending Value
• Cell B4: Number of Years

2) Enter the formula

3) Format as %

Right-click the formula cell, choose Format Cells, select Percentage, and set decimal places (usually 2).

Quick Example

Suppose you invested 10,000 and it grew to 18,000 in 6 years. The CAGR is:

So your money grew at an annualized rate of about 10.29%, even though actual year-to-year returns may have varied.

Excel Alternatives for CAGR

Using the RRI function

Excel also supports:

For example:

This returns the same growth rate as the classic CAGR formula.

Using POWER (equivalent approach)

Sample CAGR Scenarios

Beginning	Ending	Years	CAGR
10,000	18,000	6	10.29%
50,000	62,000	4	5.53%
250,000	190,000	3	-8.74%

Common CAGR Mistakes in Excel

• Using months as years: If you have 36 months, use 3 years (or divide months by 12).
• Not formatting as percentage: A result like 0.1029 should display as 10.29%.
• Negative or zero starting values: CAGR assumes a positive base value in most financial analysis.
• Comparing CAGR with average annual return: They are not the same metric.

CAGR vs Average Return

Average return simply averages yearly percentages. CAGR accounts for compounding and is usually better for comparing long-term growth. If returns are volatile, CAGR gives a more realistic picture of what constant annual growth would have looked like.

When to Use CAGR

• Investment performance comparisons
• Revenue growth across multiple years
• User growth, subscriber growth, and business KPIs
• Forecasting and strategic planning models

FAQ: CAGR Calculation Excel

Can CAGR be negative?

Yes. If ending value is less than beginning value, CAGR will be negative.

Can I calculate CAGR with dates?

Yes. You can compute years using dates (for example with YEARFRAC) and use that result in the CAGR formula.

Is CAGR the same as IRR?

No. CAGR assumes one beginning value and one ending value. IRR/XIRR is for cash flows occurring at different times.

Bottom Line

If you need a clean, reliable growth metric, CAGR in Excel is one of the fastest methods available. Use the formula once, format as a percentage, and you have a consistent annualized rate you can use for better decisions.