Growth and results · updated October 21, 2026
What is CAGR (compound annual growth rate) and how is it calculated
CAGR shows by how many percent a number (sales, profit, a share price) grew on average each year over a period of several years. It is the steady growth rate that would have taken you from the starting value to the final one.
CAGR formula
- Starting and final value
- The number at the start and at the end of the period (for example sales five years ago and today).
- Number of years
- The length of the period.
Worked example
A company's sales grew from $100 million to $161 million in 5 years.
Total growth is 61%, but that is only 10% a year, because each year grows on top of the one before.
How to read CAGR
On stock pages you will find the 5-year CAGR for sales, earnings per share, net profit and free cash flow.
When CAGR can fool you
The starting year matters: if the period starts with a very weak year, CAGR comes out inflated. It hides the path: a 10% CAGR can come from years of +40% and −20%.
Related terms
Questions about CAGR
Why not just divide total growth by the years?
Because years compound: this year's growth applies on top of last year's. 61% over 5 years is 10% a year, not 12.2%.
These explanations are for information only. They are not a recommendation to buy or sell.
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