How to calculate CAGR of a stock or portfolio

What is the step-by-step way to work out CAGR on an Indian stock or portfolio?

CAGR is the steady yearly rate that turns your starting value into your ending value. Divide the ending value by the starting value, raise that to the power of 1 divided by the number of years, then subtract 1. For a portfolio with regular additions, use XIRR in a spreadsheet instead.

Key Takeaways

• CAGR formula: (Ending value ÷ Starting value) ^ (1 ÷ number of years) − 1.
• Use years as a decimal — 42 months is 3.5 years, not 3.
• One lump sum, one exit: use CAGR. Money going in every month: use XIRR.
• CAGR smooths the ride; it says nothing about the 40% fall in the middle.
• Add dividends back and adjust for bonus and split, or your CAGR is understated.
• Post-tax CAGR is the only number that actually reaches your bank account.

What does CAGR actually mean in plain English?

CAGR stands for compound annual growth rate. It answers one narrow question: if your money had grown at exactly the same rate every single year, what would that rate have been? Nothing more. It is a smoothing device, not a description of what really happened.

Here is why it exists. Suppose you put money into a stock on the NSE and five years later it has more than doubled. Saying it went up 118% is true but useless, because you cannot compare it to a fixed deposit or to your friend's mutual fund. Divide 118% by five and you get a wrong answer, because that ignores compounding. CAGR fixes the comparison problem by converting any total gain over any period into one annual rate.

The real-life path is almost never smooth. A stock that shows a 14% CAGR over eight years may have fallen 45% in year three and doubled in year seven. CAGR quietly erases all of that. Treat it as a scorecard for the destination, never as a description of the journey. The journey is what makes people sell at the bottom.

How many of the 1,518 listed Indian companies with full-year fundamentals clear each screen, as of September 2026

Screen	Companies	Share of 1,518
ROE above 15%	458	30.2%
ROCE above 15%	464	30.6%
Debt-to-equity below 1	1,282	84.5%
PE between 0 and 40	988	65.1%
All three quality checks together	334	22.0%
Quality checks plus PE under 40	241	15.9%

What is the CAGR formula, and how do I work it out by hand?

The formula is: CAGR = (Ending value ÷ Beginning value) ^ (1 ÷ number of years) − 1. Then multiply by 100 to get a percentage. That power sign is the part people skip, and skipping it is what produces nonsense answers.

Take an illustrative example, with made-up figures purely to show the mechanics. You buy shares worth ₹1,00,000. Five years later the holding is worth ₹2,00,000. Step one: 2,00,000 ÷ 1,00,000 = 2. Step two: 1 ÷ 5 = 0.2. Step three: 2 raised to the power 0.2 = 1.1487. Step four: 1.1487 − 1 = 0.1487, which is 14.87%. So doubling your money in five years is roughly a 15% CAGR. Worth memorising as a mental benchmark.

Two mistakes ruin most hand calculations. First, people use whole years when the holding period is not whole. If you held for 42 months, the exponent is 1 ÷ 3.5, not 1 ÷ 3. Count actual days and divide by 365 if you want to be precise. Second, people use the wrong starting value: use what you actually paid, including brokerage and STT, not the price you wish you had got.

How do I calculate CAGR in Excel or Google Sheets?

You do not need a special function. Type the formula directly. If your buy value is in cell A1, your current value in B1, and the number of years in C1, then the cell formula is =(B1/A1)^(1/C1)-1. Format the cell as a percentage and you are finished. This works identically in Excel, Google Sheets and LibreOffice.

If you would rather not hard-code the years, let the sheet count them for you. Put the buy date in A2 and the sell or valuation date in B2, then use =(B1/A1)^(365/(B2-A2))-1. The sheet subtracts the two dates to get days, and the formula annualises from there. This removes the single most common source of error, which is rounding a 29-month holding into two years.

Excel also has the RRI function: =RRI(years, present_value, future_value). It returns the same number. Some people prefer it because the inputs are labelled. Avoid the old GEOMEAN workaround unless you specifically have a list of yearly returns rather than a start and end value, because it is easy to feed it the wrong kind of data and never notice.

How do I find the CAGR of a whole portfolio with SIPs and top-ups?

Here is where most Indian investors get it wrong. The plain CAGR formula assumes one payment in, one value out. Your demat account is nothing like that. You bought some shares in 2021, added in the March 2022 fall, started a monthly SIP, sold one holding to pay for a wedding, and received dividends along the way. A start-to-end CAGR on that mess is meaningless.

The correct tool is XIRR. It handles irregular cash flows on irregular dates and still gives you one annualised rate. In a spreadsheet, make two columns. Column A holds dates. Column B holds amounts, with every rupee you put in entered as a negative number and every rupee you took out as a positive number. The last row is today's date with your current total portfolio value entered as a positive number, as if you sold everything today. Then write =XIRR(B:B, A:A) and format as percentage.

Include everything: purchases, sell proceeds, dividends credited to your bank, and any brokerage or charges if you want the honest figure. Most Indian brokers and depositories now export a transaction statement you can paste straight in. If your XIRR comes out far lower than the CAGR of the individual stocks you hold, that gap is your timing. You added money after things had already run up.

Should I calculate CAGR on the share price or on the company's profits?

Both, and comparing the two is where the insight lives. Price CAGR tells you what the market handed you. Earnings CAGR, computed the same way on net profit or revenue from the annual reports, tells you what the business actually produced. Sales CAGR and profit CAGR over five and ten years are on almost every Indian screener for exactly this reason.

When price CAGR runs far ahead of profit CAGR for years, the gap is re-rating. The market simply agreed to pay a higher multiple for the same earnings. That is real money in your pocket, but it is borrowed from the future and it can reverse. When price CAGR lags profit CAGR, the business grew and the multiple shrank, which is often where patient money finds its opportunities.

One caution on computing earnings CAGR. If the base year had a depressed or negative profit, the formula either explodes into an absurd number or breaks entirely, because you cannot take a fractional power of a negative ratio. Pick a normal base year, or use revenue instead, and say clearly which years you used.

How many Indian companies are actually good enough to compound?

A high past CAGR is only worth chasing if the business behind it can keep compounding. That is a much smaller group than the market's noise suggests. Across our universe of 1,843 listed Indian companies, 1,518 have full-year fundamentals available. The table above shows how quickly that list thins out once you apply ordinary quality tests.

The headline is the two bottom rows. Only about a fifth of companies clear return on equity above 15%, return on capital employed above 15% and debt-to-equity below 1 at the same time, as of September 2026. Insist that they also trade below a PE of 40 and you are left with roughly one in six. For context, the median PE across the universe sits at 24.0, so the valuation filter is not a harsh one. Quality, not price, is what eliminates most names.

One fairness point. A flat debt-to-equity rule unfairly punishes banks and NBFCs, because borrowing money and lending it out is their entire business model, not a sign of stress. Judge lenders on their own measures instead. The wider lesson for anyone computing CAGR: a stock's past compounding rate and a business's ability to keep compounding are two different questions, and only the second one pays you from here.

Do dividends, bonus shares, splits and taxes change the CAGR?

Yes, all four, and ignoring them is the reason many investors think their portfolio did worse than it did. If you only compare buy price to current price, you have thrown away every dividend you received. Add dividends back into your ending value, or better, run XIRR with each dividend as a positive cash flow on the date it was credited. On an index like the Nifty, the total-return version has meaningfully outrun the price version over long stretches for exactly this reason.

Bonus issues and stock splits do not create value, but they do wreck a naive calculation. After a 1:1 bonus your share count doubles and the price roughly halves, so a price-only CAGR will show a disaster that never happened. Always work with total value of the holding, meaning shares held multiplied by price, not price alone. Adjusted price history from the exchanges already accounts for this.

Then there is tax, which is the number nobody wants on the spreadsheet. In India, listed equity held over twelve months attracts long-term capital gains tax at 12.5% on gains above ₹1.25 lakh in a financial year, while gains on holdings sold within twelve months are taxed at 20%. Securities transaction tax and brokerage come off too. Run your CAGR once gross and once on the amount that would actually land in your bank after tax. The second number is your real rate.

Where does CAGR quietly mislead you?

The first trap is the chosen start date. Begin your measurement at the March 2020 low and almost anything looks like a wonderful compounder. Begin it eighteen months earlier and the same stock looks ordinary. Whenever someone quotes a CAGR, ask what date they started from and whether a slightly different start would change the story. Honest analysis shows three periods, say three, five and ten years, not the one that flatters.

The second trap is that CAGR hides risk completely. Two holdings can both show 15% over seven years while one drifted up calmly and the other fell 60% twice. The CAGR is identical. Your ability to hold on through those two is not. Alongside the CAGR, note the worst fall from a peak that you sat through, and be honest about whether you actually held.

The third trap is extrapolation. A past CAGR is arithmetic on history. It is not a forecast, and a business growing profits at 30% a year cannot do that forever, because eventually it would be larger than the economy. Use CAGR to compare what has happened and to size your expectations, then do the separate work of asking whether the earnings, the balance sheet and the price still support the next stretch.

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Conclusion

CAGR is one line of arithmetic: divide ending by starting, take the power of one over the years, subtract one. Once money is going in monthly, switch to XIRR and let the spreadsheet handle the dates. Then do the three things most people skip: add dividends back, adjust for bonus and split, and run it again after tax. That gives you a number you can actually compare across your fixed deposits, your funds and your stocks. Which specific businesses look capable of compounding from here is a separate call, and that one sits behind KYC inside our app.

BossInvestor is a SEBI Registered Research Analyst (INH000024143). This article is for educational and informational purposes only. It explains a method and is not investment advice, nor a recommendation to buy, sell or hold any security. Market-wide figures are computed from our universe as of September 2026; past metrics do not guarantee future results. Always do your own research or consult a registered adviser before investing.

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Frequently Asked Questions

What is a good CAGR for an Indian stock portfolio?

There is no official benchmark, but the honest test is relative. Compare your portfolio's XIRR against a broad index total-return figure over the same period and against a fixed deposit rate. If you are not beating the index after tax and costs, the extra effort and risk of picking individual stocks is not paying you. Also measure over at least five years. Anything shorter mostly measures luck and the starting point you happened to choose.

What is the difference between CAGR and XIRR?

CAGR assumes one investment in and one value out, with nothing added or withdrawn in between. XIRR handles any number of cash flows on any dates, positive or negative. If you invested a lump sum once and never touched it, both give the same answer. The moment you run a SIP, top up during a fall, take dividends in cash, or sell part of a holding, only XIRR is correct. For a real demat account, XIRR is almost always the right tool.

Can CAGR be negative, and how do I calculate it then?

Yes. If your ending value is lower than your starting value, the ratio is below 1 and the formula returns a negative percentage. The arithmetic is identical, and the result tells you the steady annual rate at which your money shrank. The formula only breaks when a value is zero or negative, which can happen with earnings but not with a share price. In that case switch to revenue, or pick a base year with a normal profit and say which year you used.

Does CAGR include dividends?

Not by default. The basic formula uses only your starting and ending values, so any dividend paid out along the way is invisible. That understates your true return, sometimes by one to two percentage points a year on higher-yielding Indian shares. Fix it either by adding total dividends received to your ending value before computing, or by running XIRR with each dividend entered as a positive cash flow on its credit date. The second method is more accurate because it respects timing.

How many years of CAGR should I look at before buying a stock?

Look at three windows, not one: three years, five years and ten years, for both price and profits. A company strong across all three has survived at least one difficult stretch. A company that only looks good on three years may simply be riding a favourable cycle. Also check whether the business still passes basic quality tests today. As of September 2026, only 22.0% of the 1,518 Indian companies with full-year fundamentals clear ROE above 15%, ROCE above 15% and debt-to-equity below 1 together.