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CAGR is an average growth rate normalised for fluctuations. See the link referred. To quote from the link:
'Compound annual growth rate (CAGR) is an average growth rate over a period of several years. It is a geometric average of annual growth rates: CAGR = (ending value ÷starting value)1/(number of years - 1
If a company had sales of £10m in 2005 and £15m in 2010 then the CAGR of its sales is: (15 ÷10)1/5 - 1 = .084 = 8.4%
If percentage growth rates are used it is important to remember to add one to each of them before calculating the geometric average. For example, the CAGR over two years of 10% one year and 20% the next is (1.1 ×1.2)1/2 - 1.
Although no historical data is a substitute for a forecast, the CAGR over a number of years (typically the last five) is a better indication of a trend than a single year's growth which may be atypically good or bad."
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∙ 10y ago
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