Growth Stock

Growth stock

Common stock of a company that has an opportunity to invest money and earn more than the opportunity cost of capital.

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growth stock

The stock of a firm that is expected to have above-average increases in revenues and earnings. These firms usually retain most earnings for reinvestment and therefore pay small dividends. The stock, often selling at relatively high price-earnings ratios, is subject to wide swings in price. Examples include Intel, General Electric, and Dell.

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Growth Stock

Share in a company performing better, or expected to perform better, than its industry or the market as a whole. Shares generating a return on equity of greater than 15% are generally classified as growth stocks, but not all growth stocks are classified as such. Such stocks usually pay little to nothing dividends as the companies reinvest most of their earnings. Some believe that many or most growth stocks are overvalued, citing for example the large number of growth stocks during the dotcom bubble.

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Growth Stock

What Does Growth Stock Mean?

Shares of a company whose earnings are expected to grow at an above-average rate relative to the market. Also known as a glamor stock.

Investopedia explains Growth Stock

A growth stock usually does not pay a dividend, as the company would prefer to reinvest its retained earnings back into capital projects for the company. Most technology companies are considered growth stocks. They reinvest earnings back into research and development for future growth. Note that a growth company's stock is not always classified as growth stock. In fact, a growth company's stock is often overvalued.

Related Terms:
• Equity
• Large Cap
• Price-Earnings Ratio—P/E Ratio
• Small Cap
• Value Stock