Compound Annual Growth Rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year of the investment's lifespan.
Formula
CAGR = (Ending Value / Beginning Value)^(1/n) - 1
Where 'n' is the number of years.
Why use CAGR?
CAGR is one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time. It smooths out the volatility of returns and gives you a single annual growth rate.