CAGR explained

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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

  1. 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

  2. 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%+?).

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

  4. 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!

  5. 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

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

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

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