CAGR explained



What does CAGR mean? How do I use CAGR in financial analysis? How to calculate CAGR? What is the formula for CAGR in Excel? All of these questions about CAGR will be answered in this video!

CAGR is often found in the financial news, more specifically in merger and acquisition announcements, as well as investor presentations where a longer term perspective is taken than just the current year. You might find a CEO or CFO talking about the CAGR of the attractive markets the company competes in, the commitment the company makes on the CAGR of its revenue, and the resulting CAGR in earnings. What is important to understand is that CAGR is never stand-alone, it’s always the CAGR of something: CAGR of estimated market size, CAGR of revenue, CAGR of Earnings Per Share. Very often, CAGR is applied to a 3-year or 5-year period, to zoom out to the bigger picture of the historical financial performance of a company, or its expected future performance.

What does the acronym CAGR stand for? CAGR is Compound Annual Growth Rate. If you look up the textbook definition of CAGR, it will tell you that CAGR is the geometric progression ratio that provides a constant rate of return over the time period.

Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

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34 Comments

  • The Finance Storyteller

    Enjoyed this explanation of CAGR? Then please subscribe to my channel, and as a next step watch my video on how to calculate weighted average revenue growth for a company with multiple business units https://www.youtube.com/watch?v=v9PPiUlkMEs

    June 16, 2020 - 8:43 am Reply
  • GoldBlockCareer

    excellent explanation, thank you

    June 16, 2020 - 8:43 am Reply
  • Ashwani Singh

    Wish you were my tutor the whole study journey…Thanks a lot.

    June 16, 2020 - 8:43 am Reply
  • José

    Thank you for the explanation! Very simple & concise! 🙂

    June 16, 2020 - 8:43 am Reply
  • loui arale

    Is it ok if cagr 5 years result minus ?

    June 16, 2020 - 8:43 am Reply
  • Ilya

    Thank you, very nice video!

    June 16, 2020 - 8:43 am Reply
  • Chris

    Very helpful! Nice way of explaining with the visuals, thank you sir.

    June 16, 2020 - 8:43 am Reply
  • Naman Saklecha

    really well explained. Thank you !

    June 16, 2020 - 8:43 am Reply
  • VoltzFGC

    Great Video!

    June 16, 2020 - 8:43 am Reply
  • Vanessa Luu

    Great video! Very helpful. I love the drawings.

    June 16, 2020 - 8:43 am Reply
  • koreanKK KPOP

    Thanks very much. So easy to understand now.

    June 16, 2020 - 8:43 am Reply
  • MS

    This was a perfect explanation on CAGR with a nice example. Thanks very much

    June 16, 2020 - 8:43 am Reply
  • srenyvas1

    VERY GOOD EXPLANATION

    June 16, 2020 - 8:43 am Reply
  • K.Rajmani

    wonderfully Explained Sir..

    June 16, 2020 - 8:43 am Reply
  • Nardos Teshome

    Short, crisp and simple to understand!!! Especially for Non – finance managers like me 🙂

    June 16, 2020 - 8:43 am Reply
  • Uday Raj

    Beautiful…

    June 16, 2020 - 8:43 am Reply
  • Bruce Butler

    awesome simple and clear video

    June 16, 2020 - 8:43 am Reply
  • Ethan Luc

    Excellent explanation and formula derivation. Don't really have any other comments, other than it might have been useful to see what sorts of CAGRs different industries (or is it as specific as companies) see across, say, a 5 year period. Guessing tech start-ups see huge CAGRs, for instance (50%+?).

    June 16, 2020 - 8:43 am Reply
  • Anmol Verma

    Amazing explanation man. Thank you for putting in the effort 🙂 Keep it up !

    June 16, 2020 - 8:43 am Reply
  • Maximiliano Villalba

    Thanks so much for such a clear, simple and concise explanation!

    June 16, 2020 - 8:43 am Reply
  • The Finance Storyteller

    Does your company use the term CAGR in its presentations or business updates? If so, how frequently? Let me know by commenting below!

    June 16, 2020 - 8:43 am Reply
  • Josh Ortiz

    THANK YOU SOOO MUCH! My boss had talked about CAGR but I felt dumb asking for an explanation and watching your video explained it so easily for me. Thank you! Maybe next you can teach us APR vs Interest rates when it comes to home buying and what they mean or how to compare loan offers! Cause there aren't any good videos at all out there!

    June 16, 2020 - 8:43 am Reply
  • Ravi Mangalaramanan

    best possible explanation. thank you sir

    June 16, 2020 - 8:43 am Reply
  • Arpan DAS GUPTA

    Very Well Explained. Thanks Man!

    June 16, 2020 - 8:43 am Reply
  • NICOLAS SUAREZ

    realmente fantastico, asi es un placer aprender, muy bien explicado, gracias 😀

    June 16, 2020 - 8:43 am Reply
  • Pascale Bouffard

    Thank you. Very clear

    June 16, 2020 - 8:43 am Reply
  • BuildMy Gifts

    thx for your help

    June 16, 2020 - 8:43 am Reply
  • Iselie Iglesias

    Easy to understand! Thanks!

    June 16, 2020 - 8:43 am Reply
  • hajar saad

    excellent video and very good and simple explanation on CAGR..thanks so much for this!!!

    June 16, 2020 - 8:43 am Reply
  • Daniel Banta

    Watched 5 videos, was completely confused, then I saw this one and it finally clicked. You did a great job anticipating where I would be confused and was ready with examples to help me overcome them. Great work

    June 16, 2020 - 8:43 am Reply
  • Mary Quintieri

    very good video on CAGR.

    June 16, 2020 - 8:43 am Reply
  • sung kuan

    Good job man! Clear and concise!

    June 16, 2020 - 8:43 am Reply
  • Bhavna Rajput

    Wonderfully explained… I really have no words to express my gratitude for the help I got from this video …

    June 16, 2020 - 8:43 am Reply
  • Tengiz Khrustali

    This is the best out of all the videos I have seen on youtube concerning CAGR. THANK YOU <3 keep up the good work!

    June 16, 2020 - 8:43 am Reply

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