Growth
What is compound annual growth rate (CAGR)?
The steady yearly rate that would take a figure from its starting value to its ending value over a number of years. It smooths out one-off good or bad years.
How it is calculated
The ending value divided by the starting value, raised to the power of one over the number of years, minus one. A three-year rate uses the cube root; a ten-year rate uses the tenth root.
How to read it
Compare rates over different spans to see the direction: when the three-year rate is well below the ten-year rate, growth is slowing. A five-year rate above 10% is strong for a large company. Check that growth was not bought through acquisitions.
Keep in mind
It compares whole fiscal years only. The rate has no meaning when either endpoint is zero or negative, which is why it is rarely shown for earnings or free cash flow at loss-making companies.
Where the numbers come from
Scrutar computes compound annual growth rate (CAGR) from the figures each company reports to the SEC in its annual and quarterly filings, using the XBRL data attached to those filings.