I was trying to figure out the CAGR of EBIT of certain companies that filed for bankruptcy. Needless to say, most of these show a negative trend in their EBIT values, often starting from a positive in the past and ending up with a negative value. However, the CAGR often does not work when one of the values is negative. I did look this up online and found a couple of formulae, but I never understood the math behind those formulae. Can someone please help me figure out the logic we need to compute CAGR when either the beginning or ending value is negative? I am thinking it would have to do something with geometric mean returns, but not really sure. Would be great if someone could explain the mathematics behind it all, i.e., to find CAGR when one of the two: beginning or ending value, is negative.
Also, how do we check if the CAGR figure we get is actually right? I mean, if we have 2 positive values and the percentage change in them, we can always substitute them back like
So, is there any way to cross-check in the case of a negative beginning or ending value? Please help! Thank you in advance!