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CAGR, or Compound Annual Growth Rate, is a metric used to measure the mean annual growth rate of an investment over a specified period longer than one year. It is particularly useful for comparing the performance of different investments or businesses over time. The formula for CAGR is derived from the rule of 72, which estimates the number of years required to double the invested money at a given annual rate of return. CAGR is calculated using the formula:

CAGR = (Ending Value / Beginning Value) ^ (1 / n) - 1

where n is the number of years the investment grew. This formula takes into account the effects of compounding, which is the process by which an asset grows over time at a rate of return that is compounded at regular intervals. CAGR is often used in financial analysis, business planning, and investment decision-making. It provides a straightforward way to compare the growth rates of different investments or businesses, making it a valuable tool for investors, analysts, and business owners. However, it is important to note that CAGR does not account for the timing of cash flows or the risk associated with an investment. Therefore, it should be used in conjunction with other metrics and analysis techniques for a comprehensive understanding of an investment's performance.