The acronym CAGR stands for Compound Annual Growth Rate, which is a business term used in the analysis of a company'sÂ investment performance. The CAGR measures the annual average rate of increase, such as the value of a quantity,Â over a specified number of years.
The CAGR is often used by business firms as a reference for their annual return of investments. It is a method of smoothing out returns by assuming that investments increase at a constant rate which, in reality, fluctuate. The CAGR is computed using the formula CAGR = (ending value / starting value)1 / number of years - 1.