CAGR vs Absolute Return: How to Actually Judge a Stock's Performance
"This stock doubled in 5 years" sounds great until you compare it to what a boring fixed deposit would have done over the same period.
A stock that "doubled in 5 years" sounds impressive — until you realize that's only about a 15% annualized return, which is good but not exceptional for equity. Absolute return numbers, on their own, make it easy to overrate performance over long periods and underrate it over short ones.
Why 5-year and 1-year gains aren't comparable as-is
A 50% gain in 1 year and a 50% gain in 5 years represent very different rates of growth, but the raw number looks identical. CAGR converts both into an annualized rate, which is the only way to fairly compare returns across different holding periods — or against a benchmark, or against what a different asset would have returned.
Use CAGR to benchmark, not just to celebrate
A genuinely useful question isn't "did I make money" but "did I make more than a boring index fund or FD would have made me, for the risk I took on." Converting a stock's gain into CAGR makes that comparison possible in a way a raw percentage gain doesn't.
Do this now
Use the CAGR Calculator with your purchase price, current price, and holding period to get your annualized return — then compare it honestly against a benchmark index or a fixed-income alternative for the same period.