How to Calculate Growth Rate of Stock Price

Understanding the growth rate of a stock price is fundamental for investors looking to evaluate the performance of an asset over time. Whether you are analyzing a short-term trade or a long-term holding, calculating the growth rate helps you normalize returns and compare different investment opportunities.

Use the calculator below to determine both the Absolute Return and the Compound Annual Growth Rate (CAGR) of your stock investments.

Stock Growth Rate Calculator

function calculateGrowth() { var initial = parseFloat(document.getElementById('initialPrice').value); var final = parseFloat(document.getElementById('finalPrice').value); var years = parseFloat(document.getElementById('yearsHeld').value); var resultBox = document.getElementById('resultsDisplay'); // Validation if (isNaN(initial) || isNaN(final) || isNaN(years)) { alert("Please enter valid numbers for all fields."); return; } if (initial <= 0) { alert("Initial price must be greater than 0."); return; } if (years = 0) { cagrElement.style.color = "#28a745"; // Green document.querySelector('.spgr-result').style.borderLeftColor = "#28a745"; } else { cagrElement.style.color = "#dc3545"; // Red document.querySelector('.spgr-result').style.borderLeftColor = "#dc3545"; } // Update Details document.getElementById('totalReturnResult').innerText = totalReturn.toFixed(2) + "%"; // Format Currency var formattedProfit = (profit < 0 ? "-" : "") + "$" + Math.abs(profit).toFixed(2); document.getElementById('monetaryResult').innerText = formattedProfit; document.getElementById('multiplierResult').innerText = multiplier.toFixed(2) + "x"; }

What is Stock Price Growth Rate?

The stock price growth rate represents the speed at which a stock's value increases (or decreases) over a specific period. While simply looking at the dollar difference tells you how much money was made, calculating the percentage growth rate allows investors to compare the performance of a specific stock against benchmarks like the S&P 500 or other assets in their portfolio.

The Difference Between Absolute Return and CAGR

When calculating stock growth, there are two primary metrics used:

• Absolute Return (Total Return): This is the simple percentage change from the buy price to the sell price. It does not account for how long it took to achieve that return. A 50% return is excellent over one year, but poor over twenty years.
• Compound Annual Growth Rate (CAGR): This smooths out the volatility of returns over a period of time. It provides a theoretical "annual" growth rate that tells you what the investment would have grown by each year if it had grown at a steady rate.

Formulas Used in This Calculator

To perform these calculations manually, you can use the following mathematical formulas:

1. Absolute Growth Formula

((Ending Price – Beginning Price) / Beginning Price) × 100

Example: Buying at $100 and selling at $150.
(($150 – $100) / $100) × 100 = 50% Total Return.

2. CAGR Formula

((Ending Price / Beginning Price) ^ (1 / Number of Years)) – 1

Example: Buying at $100 and selling at $150 over 3 years.
(($150 / $100) ^ (1 / 3)) – 1 = 1.1447 – 1 = 0.1447 = 14.47% Annualized Growth.

Why Calculate Growth Rate?

Calculating the growth rate is essential for:

• Benchmarking: Determining if your stock is beating the market average (historically ~10% for the S&P 500).
• Inflation Adjustment: Ensuring your wealth is growing faster than the rate of inflation.
• Portfolio Rebalancing: Identifying which assets are over-performing or under-performing to adjust your asset allocation.

Factors Affecting Stock Price Growth

While historical formulas provide a clear picture of past performance, future growth is driven by:

• Earnings Growth: Companies that increase their profits typically see their stock price rise.
• P/E Expansion: If investors are willing to pay more for every dollar of earnings (sentiment improves), the price rises.
• Dividends: While not part of the price per se, dividends reinvested significantly accelerate the Total Return growth rate.