Annualized Growth Rate (AGR) Calculator
What is the Annualized Growth Rate (AGR)?
The Annualized Growth Rate (AGR), also known as the Compound Annual Growth Rate (CAGR), is a measure of the average annual rate at which an investment or business metric has grown over a specified period longer than one year. It smooths out volatility and provides a single, representative growth rate.
Unlike a simple average growth rate, AGR accounts for the effect of compounding. This means that the growth in each subsequent year is applied to the new, increased value from the previous year, providing a more accurate picture of long-term performance.
How to Calculate AGR
The formula for calculating the Annualized Growth Rate is:
AGR = (Ending Value / Starting Value)^(1 / Number of Years) – 1
Where:
- Starting Value: The initial value of the metric at the beginning of the period.
- Ending Value: The final value of the metric at the end of the period.
- Number of Years: The total duration of the period in years.
When to Use AGR
AGR is widely used to:
- Evaluate the performance of investments over multiple years.
- Track the growth of revenue, profit, or customer base for businesses.
- Compare the growth trends of different entities or projects over the same time frame.
- Forecast future performance by assuming a sustained AGR.
Example Calculation
Let's say a company's revenue grew from $100,000 (Starting Value) to $250,000 (Ending Value) over 4 years (Number of Years).
Using the formula:
AGR = ($250,000 / $100,000)^(1 / 4) – 1
AGR = (2.5)^(0.25) – 1
AGR = 1.2574 – 1
AGR = 0.2574
To express this as a percentage, multiply by 100:
AGR = 25.74%
This means the company's revenue grew at an average compounded rate of 25.74% per year over those 4 years.