CAGR. The year over year growth rate applied to an investment or other part...
The average growth rate over a period of several years: the geometric average of annual growth rates.... more on: Compound Annual Growth Rate
Best defined by example. If you invest $100 today and make 5% in the first year and reinvest ($105) and make 8% in the second year, the compound annual growth rate is 6.489%. The calculation is $100x1.05x1.08=$113.4 which is what you end up with at the end of year two. The average return is [square root(113.4/100) -1]= 0.06489 or 6.489%. Note 1. If we had three compounding periods we would take the cubic root (power of 1/3). Note 2. If we had invested at exactly 6.489 in both periods, we get $100x1.06489x1.06489=$113.4. Note 3. The example is directed to a return - but CAGR could be applied to earnings growth, GDP growth, etc.
Compound Annual Return Compound growth rate
The year over year growth rate applied to an investment or other aspect of a firm using a base amount.
The year over year growth rate of an investment over some specified period of time.
This is the measure of the return on an investment over a specific period of time, usually more than one year. It is the annual return number (expressed in %) which, if used as the return each year during the specific time period, would have resulted in the total cumulative return over that specific period time.
The average rate at which a particular financial parameter compounds up over a period of years.
Compound Annual Growth Rate (CAGR) or cumulative annual growth rate is another term for the 'rate of return' or 'interest rate' variable in the formula Present value of a dollar and Future value of a dollar discussed at time value of money. It measures the rate of change in a value between two points in time(t and t0). These equations are basic to the concept of compound interest (see the simpler understanding section).
