Compound Annual Growth Rate

Compound annual growth rate means the average yearly growth rate over a period, assuming growth compounds each year. In simple terms, CAGR shows how fast something grew per year on average. CAGR is important because it smooths out growth over multiple years and helps investors compare long-term performance. It is often used for revenue, earnings, users, or market size. For example, if a company’s revenue grows from $100 million to $200 million over several years, CAGR shows the average annual growth rate needed to reach that level. CAGR does not show yearly ups and downs. It gives a smoothed average, so actual growth may have been uneven.