cagr calculator excel formula

What is CAGR?

CAGR stands for Compound Annual Growth Rate. It tells you the “smoothed” annual return that would turn your starting value into your ending value over a specific number of years.

It is one of the most useful metrics in finance, investing, business analysis, and forecasting because it removes year-to-year noise and summarizes growth in one clean percentage.

Basic CAGR Excel Formula

The most common Excel formula is:

If your beginning value is in B2, ending value in C2, and years in D2, use:

Then format the cell as Percentage to see the annual growth rate.

Step-by-Step in Excel

1) Organize your inputs

• B2: beginning value (for example, 10,000)
• C2: ending value (for example, 18,000)
• D2: number of years (for example, 6)

2) Enter the CAGR formula

In E2, type:

3) Format as percentage

Click the result cell and apply percentage formatting. If desired, show 2 decimal places.

Worked Example

Suppose an investment grows from $10,000 to $18,000 in 6 years:

The CAGR is approximately 10.30% per year. That does not mean each year returned 10.30%; it means the average compounded yearly growth equals 10.30%.

CAGR Using Dates in Excel

If you have start and end dates instead of a clean whole-number year count, use YEARFRAC to compute fractional years:

Where:

• B2 = beginning value
• C2 = ending value
• E2 = start date
• F2 = end date

Common CAGR Mistakes to Avoid

• Using 0 or negative beginning value: the standard CAGR formula requires positive start and end values.
• Wrong year count: double-check whether you should use calendar years, exact date difference, or fiscal years.
• Forgetting percentage format: raw result is decimal (0.103), not 10.3 unless formatted.
• Assuming steady annual returns: CAGR smooths volatility; it is not actual yearly performance.

CAGR vs. Average Annual Return

Simple averages can mislead when returns vary significantly. CAGR accounts for compounding, making it better for long-term performance comparison across investments, business revenue growth, user growth, or market size expansion.

When to Use XIRR Instead

If you have multiple cash flows at irregular dates (for example SIP investments, deposits, withdrawals), use XIRR rather than CAGR. CAGR is best for one start value and one end value over time.

Quick Reference Formulas

• Standard: =(C2/B2)^(1/D2)-1
• With Dates: =(C2/B2)^(1/YEARFRAC(E2,F2))-1
• Ending Value from CAGR: =B2*(1+E2)^D2
• Beginning Value from CAGR: =C2/(1+E2)^D2

Final Takeaway

If you need a fast, reliable way to express multi-year growth as one annualized number, CAGR is the right metric. Use the calculator above to get the result instantly, then copy the generated Excel formula into your spreadsheet model.