What Is A Good CAGR?
January 16, 2023 January 17, 2023 Laxman
Do you know What Is A Good CAGR? What should be a good CAGR preferred by the company or CAGR for industry as well as CAGR for stock? Well, here we will know What Is A Good CAGR? As well as What Is CAGR? what does CAGR mean? And Compound Annual Growth Rate Formula as well as the CAGR Calculation and know about CAGR calculator too. Further, we will also discuss What is a good CAGR rate for an industry? What is a good CAGR for a start-up? What is a good CAGR for a portfolio? What is a good CAGR for a mutual fund? And how to calculate CAGR in excel?
Before knowing what is a good CAGR? You should firstly know What Is CAGR? So, let us understand.
1 What Is A Good CAGR?
2.1 What Does The CAGR Tell You?
2.2 Is CAGR The Same As Average?
2.3 What Does 3 Years CAGR Mean?
2.4 What Does Negative CAGR Mean?
2.5 What Is A Good CAGR For A Portfolio?
2.6 What Is A Good CAGR For A Mutual Fund?
2.7 Is 5% A Good CAGR?
The growth of an investor or say how much an investor can grow is measured by CAGR over a specific period. So, CAGR takes into account the investment as well as the average return an investor earns on the investments and calculates the return with the duration of the investment.
So, CAGR is an important factor to be considered by the company or an investor, businessman or CEO of a company. So, this CAGR percentage can vary according to the company or the business operations.
In the case of the best small-cap companies, a CAGR of about 15 % to 30 % can be considered as a good CAGR. Whereas, in the case of best start-up companies, a CAGR of about 100 % to 500 % at the beginning of the company will be considered as good for the company. And similarly, in the case of large-cap companies, a CAGR of about 5 % to 12 % will be considered as a good CAGR for a company.
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What Is CAGR?
CAGR stands for Compound Annual Growth Rate, and we refer to this as CAGR in short form.
So, compounded annual growth rate (CAGR) is the most commonly used term that measures the constant growth over multiple years.
It can also be depicted and understood as a mathematical formula providing a "smoothed" rate of return. It tells you about an investment what it can yield on an annually compounded basis by which the investor can know what that will have at the end of the investment period.
CAGR meaning is often connected with precise constraints which help to indicate the performance of a company over a fixed period, which are sales of the company, revenue of the company, earnings of the company, etc.
What Does CAGR Mean?
So, CAGR stands for Compound Annual Growth Rate which is a mathematical formula providing a "smoothed" rate of return to the investors.
Compound Annual Growth Rate Formula
The formula for calculating Compound Annual Growth Rate Formula is as follows:
Formula 1:
CAGR = (End value/ Beginning value) ^1/n -1
Where in the above CAGR formula,
n refers to the investment period
OR it can also be represented as follows:
CAGR (Compound Annual Growth Rate) = (( EV / BV ) ^ 1/n ) – 1
EV refers to Earned Value or the Earning Value of Investment.
BV refers to the Beginning Value of Investment.
n refers to Periods that can be in form of months, years, and so on.
What Is A Good CAGR Rate For An Industry?
In the case of the best small-cap companies, a CAGR of about 15 % to 30 % can be considered as a good CAGR.
And similarly, in the case of large-cap companies, a CAGR of about 5 % to 12 % will be considered as a good CAGR for a company.
What Is A Good CAGR For A Startup?
In the case of the best start-up companies, a CAGR of about 100 % to 500 % at the beginning of the company will be considered as good for the company.
What Is A Good CAGR For A Portfolio?
A CAGR in sales of 5 to 12 % is considered to be good for large capital companies, whereas a CAGR between 15% to 30% is considered to be good for small companies.
What Is A Good CAGR For A Mutual Fund?
the performance of mutual funds can be measured using CAGR, where the average annual growth of a mutual fund or say the decline is noticed. So, in long-term mutual funds a return between 8% to 12% can be considered as a good CAGR for an investor.
CAGR Calculation:
For example, the initial value of your investment is Rs 20,000, and the final value of your investment is Rs 30,000 which takes a time span of about 5 years (So, N = 5 years). CAGR will be calculated as follows:
CAGR = [(Ending Value/Beginning Value) ^ (1/N)] – 1
CAGR = (30,000 / 20,000) ^ (1/5) – 1
CAGR = 24.57 %
How To Calculate CAGR In Excel?
In order to calculate cagr in excel, you need to apply the cagr formula in excel as follows:
Example 1: Direct way for calculating CAGR in Excel
Where we will use the formula as follows
CAGR =(EV/BV)^(1/n)-1
And the terms in the above formula as:
BV – Beginning value of the investment
EV – Ending value of the investment
n – Number of periods
In simple terms, it was calculated as follows:
So, the resultant CAGR in Excel will be depicted as:
So, our result of CAGR in excel is 24.57 %.
CAGR Calculator:
You can use a cagr calculator also to calculate your CAGR rate and know if they turn out to be profitable for you as an investor or not.
https://youtu.be/JLigdg8sR1A
What Does The CAGR Tell You?
CAGR stands for Compound Annual Growth Rate, and we refer to this as CAGR in short form. It basically tells you about an investment what it can yield on an annually compounded basis by which the investor can know what that will have at the end of the investment period.
Is CAGR The Same As Average?
No, CAGR is not the same as average although, CAGR provided the information of the average returns earned by the company a certain time period.
What Does 3 Years CAGR Mean?
A 3-year CAGR means that sales are represented in long run or say you have calculated Sales 3 Year Compound Annual Growth Rate.
What Does Negative CAGR Mean?
A negative CAGR means that the ending value of the stock is less than the beginning value of the stock. So, a negative CAGR is not preferred by the company. A company will go for a higher CAGR that will be considered a good option.
the performance of mutual funds can be measured using CAGR, where the average annual growth of a mutual fund or say the decline is noticed. So, in long-term mutual funds a return between 8 % to 12 % can be considered as a good CAGR for an investor.
Is 5% A Good CAGR?
Stockopedia explains Sales CAGR
Growth rates differ by industry and company size. Sales growth of 5-10% is usually considered good for large-cap companies, while for mid-cap and small-cap companies, sales growth of over 10% is more achievable.
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Thus, we know What is a good CAGR? As well as What Is CAGR? what does CAGR mean? And Compound Annual Growth Rate Formula as well as the CAGR Calculation and know about CAGR calculator too. Further, we will also discuss What is a good CAGR rate for an industry? What is a good CAGR for a start up? What is a good CAGR for a portfolio? What is a good CAGR for mutual funds? And how to calculate CAGR in excel? CAGR stands for Compound Annual Growth Rate, and we refer to this as CAGR in short form.
So, compounded annual growth rate (CAGR) is the most commonly used term that measures the constant growth over multiple years. It basically tells you about an investment what it can yield on an annually compounded basis by which the investor can know what that will have at the end of the investment period. Now, we have understood What Is A Good CAGR?
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