Compound Annual Growth Rate
The constant annual rate at which a value would have had to grow to move from its starting figure to its ending figure.
Formula
CAGR = (Ending Value / Beginning Value) raised to (1 / Number of Years) - 1
Unit
%
In depth
CAGR smooths a path into a single rate, which makes it comparable across periods and instruments — and hides every bit of volatility along the way. Two investments with identical CAGR can have had entirely different journeys, one steady and one with a 60% drawdown in the middle, and the difference matters enormously to anyone who might have needed the money. It is also acutely sensitive to endpoints: measuring from a market trough to a peak produces a flattering number that says more about the dates chosen than about the investment. Always pair a CAGR with a maximum drawdown before drawing conclusions.
Worked example
₹40 grows to ₹320 over 12 years. CAGR = (320 / 40) raised to (1/12) - 1 = 8 raised to 0.0833 - 1 = 1.1892 - 1 = 18.9% a year. The eightfold headline and the 19% annual rate describe the same result.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Compound Annual Growth Rate” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.