How is the average growth rate calculated?
The average growth rate is calculated by determining the least squares regression line of best fit using the natural log (LN) of the company data. The growth rate is the slope of that line. For data points that are less than or equal to zero, we substitute the very small number of .001 in the calculation.
If you'd like to try this yourself here are a couple of reference websites:
The 'y' values in the regression calculation must be the natural log of the company data. For example, ln(revenueforyear2012). An exponential function must be applied to the slope of the resulting equation o obtain the growth rate. For example, exp(slope).
The value can also be replicated by using the Excel LOGEST() function on the original data.
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