## CAGR Defined

Defining CAGR:

CAGR is the compound annual growth rate of a metric, or the annualized growth. A 1-year cagr of 10% means that a metric grew by 10% over the past year. Simple enough. A 10-year cagr of 10% means that a value averaged 10% growth each year for 10 years. Since we are talking about compound growth this is what that 10-year cagr of 10% actually looks like we started with $100:

Year 1: | $100.00 * 1.1 = | $110.00 |

Year 2: | $110.00 * 1.1 = | $121.00 |

Year 3: | $121.00 * 1.1 = | $133.10 |

Year 4: | $133.10 * 1.1 = | $146.41 |

Year 5: | $146.41 * 1.1 = | $161.05 |

Year 6: | $161.05 * 1.1 = | $177.16 |

Year 7: | $177.16 * 1.1 = | $194.87 |

Year 8: | $194.87 * 1.1 = | $214.36 |

Year 9: | $214.36 * 1.1 = | $235.79 |

Year 10: | $235.79 * 1.1 = | $259.37 |

After 10 years the original $100 becomes $259.37, which equals a total growth of over 159%. Compounding is an extremely powerful concept.

## CAGR Calculation

Sales in 2006 were 0.8 million Euros (beginning value). In 2013, after 7 years, sales increased to 1.8 million Euros.

This means, if the company grew each year from 2006 onwards with a rate of ~12% (12.28%), sales in 2013 would be 1.8 million Euros.