Your investment grew from $10000 to $20000 over a period of 5 periods at a compounded growth rate (CAGR) of 14.87%.
14.87% is the average rate of change for the value and assumes this change was compounded every period.
This calculator determined the CAGR (Compound Annual Growth Rate) of an investment or business. This metric is used to measure how much the statistic you're analyzing (can be anything - a stock, a bond, company sales) has changed in each period between the start and end of the analysis. This may also be called an average rate of change calculator.
This is useful when the item being analyzed may have ups and downs over long periods. For Example, consider the stock below:
| Year | Price | EPS |
|---|---|---|
| 1998 | $14 | $.50 |
| 1999 | $30 | $1.00 |
| 2000 | $20 | $.75 |
| 2001 | $8 | $.50 |
| 2002 | $15 | $1.00 |
| 2003 | $30 | $1.25 |
Assume you were an investor in 2003 and had to make a decision about buying this stock. Earnings have been all over the place! How would you come up with a reasonable estimate of the average rate of change? CAGR is a simple way to smooth out the noise. For example, while earnings dropped in the 2000 reccession, you can point to a longer term trend - if we compared 1998 earnings ($.50) with 2002 earings ($1.25) and feed them into the CAGR calculator, we learn that earnings grew at a compounded rate of 20%.
You can also use this average rate of change calculator as a simple compound interest calculator. If I buy that stock at $14, hold it for 5 years, and sell it for $30 - what is my annual rate of return? By using the CAGR calculator, I can determine that my return was: 16.47%. Not bad!