The acronym CAGR stands for compound annual growth rate, which is the average annualized revenue growth rate during a certain time period.
The formula to calculate CAGR is as follows:
CAGR = (future value / present value)1/periods – 1
The following examples show two equivalent ways to calculate CAGR in Google Sheets.
Method 1: Calculate CAGR Manually
We can use the following formula to calculate CAGR manually in Google Sheets:
The following screenshot shows how to use this formula to calculate CAGR for an investment that started at $1,000 and ended at $5,000 after 9 investment periods:
The CAGR is 19.58%. This represents the compound annual growth rate of the investment during these 9 investment periods.
We can confirm this answer is correct by calculating the growth of an initial $1,000 investment if it grew consistently at 19.58% each year for 9 years:
Method 2: Calculate CAGR Using RRI Function
Another way to calculate CAGR in Google Sheets is by using the RRI function, which uses the following syntax:
RRI(number of periods, starting value, ending value)
The following screenshot shows how to use this function in practice:
The CAGR is 19.58%.
This matches the value that we calculated manually using the previous method.