Compound annual growth rate (CAGR) is a business, economics and investing term representing the mean annualized growth rate for compounding values over a given time period. CAGR smoothes the effect of volatility of periodic values that can render arithmetic means less meaningful. It is particularly useful to compare growth rates of various data values, such as revenue growth of companies, or of economic values, over time.

For annual values, CAGR is defined as:

where ${\displaystyle V(t_{0})}$ is the initial value, ${\displaystyle V(t_{n})}$ is the end value, and ${\displaystyle t_{n}-t_{0}}$ is the number of years.

CAGR can also be used to calculate mean annualized growth rates on quarterly or monthly values. The numerator of the exponent would be the value of 4 in the case of quarterly, and 12 in the case of monthly, with the denominator being the number of corresponding periods involved.

In practice, CAGR calculations are often performed in Microsoft Excel. A convenient built-in function is ${\displaystyle =IRR(nper,pv,fv)}$, where ${\displaystyle nper}$ represents the number of periods, ${\displaystyle pv}$ denotes the present value (initial investment), and ${\displaystyle fv}$ represents the future value (final value of the investment). The IRR function returns the equivalent constant interest rate per period, effectively matching the CAGR when applied over a specified period.

These are some of the common CAGR applications: