The geometric annual growth rate over a multi-year period — the single number that summarises how fast a business, market, or investment has grown.
“Twenty percent a year for twenty years — that's how you create real wealth. — Peter Lynch (paraphrased)”
— Peter Lynch
Deeper Explanation
CAGR smooths out year-to-year volatility to reveal underlying trend growth. A business with revenues of ₹100 in Year 1 and ₹200 in Year 5 has a 4-year CAGR of 18.9%. Growth investors look for businesses sustaining CAGRs of 15-30%+ in revenue and earnings — rates at which a company doubles roughly every 3-5 years. CAGR is also the metric for judging investment returns: Buffett's 20%+ CAGR in book value per share over 50 years turned each dollar into tens of thousands. The insight is that small differences in growth rate, sustained over long periods, produce enormous differences in outcome.
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