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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.

conversion image

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.

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