How to Calculate Stock Growth Rate

Higher annual growth rates means better investment performance.

Investors measure a stock's performance by how much the price the stock increases over time: The higher the compound annual growth rate, the better the investment. In order to take into consideration the effects of interest compounding, you have to account for the number of years the growth occurred over in order to get an accurate figure for the growth. You need to know original price, final price and time frame to find the growth rate for a stock.

Things You'll Need

• Calculator

Instructions

1. Divide the final value of the stock by the initial value of the stock. For example, if the stock started off being worth $120 and is now worth $145, you would divide $145 by $120 to get 1.20833.

2. Divide 1 by the number of years the growth occurred over. For example, if it took three years to go form $120 to $145, you would divide 1 by 3 to get 0.3333.

3. Raise the result from Step 1 to the result from Step 2. In this example, you would raise 1.20833 to the 0.3333 power to get 1.0651

4. Take away 1 from the Step 3 result. In this example, you would take away 1 from 1.0651 to get 0.0651.

5. Convert the result from Step 4 from a decimal to a percentage by multiplying by 100 to find the compound annual growth rate. Finishing the example, you would multiply 0.0651 by 100 to find the compound annual growth rate to be 6.51 percent.

References

• University of Oregon: Calculating Growth Rates
• Investing School: Compound Annual Growth Rate