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Finance Dictionary and Glossary of Investment Terms
Stock of a company which is growing earnings and/or revenue faster than its industry or the overall market. Such companies usually pay little or no dividends, preferring to use the income instead to finance further expansion.
Shares in a company whose earnings are expected to grow at an above average rate relative to the market.
The stock of a company that maintains consistently faster-than-average growth. Although lots of smaller firms grow fast, on Wall Street ""growth stock"" tends to refer to some large, established firms whose identities or brands are household words. These have included Coca-Cola Co., General Electric, Philip Morris Cos. and Wal-Mart Stores, among many others. Growth stocks tend to have higher P/E ratios than the overall stock market because investors expect more from them and are willing to pay for reliable growth. Probably another reason for these high prices is that the Standard & Poor''s 500 happens to include many of these stocks, and index investing based on the S&P 500 has boomed. Thus, many more investors are coming to hold growth stocks, however passively.It''s worth noting that no growth stock is a growth stock forever. IBM, for instance, experienced a good deal of difficulty in the early 1990s and saw its share price plummet (it has since rebounded).
Common stock of a company that has an opportunity to invest money and earn more than the opportunity cost of capital.
The stock of a firm that is expected to have above-average increases in revenues and earnings. These firms normally retain most of their earnings for reinvestment and therefore pay small dividends. Growth stocks tend to have dividend yields below that of the market average, valuation levels above the market average and volatility above the market average. A growth fund will tend to have a greater amount of portfolio turnover (purchases and sales).