Growth stock

Short description: Type of equity in finance

In finance, a growth stock is a stock of a company that generates substantial and sustainable positive cash flow and whose revenues and earnings are expected to increase at a faster rate than the average company within the same industry.[1] A growth company typically has some sort of competitive advantage (a new product, a breakthrough patent, overseas expansion) that allows it to fend off competitors. Growth stocks usually pay smaller dividends, as the companies typically reinvest most retained earnings in capital-intensive projects.

## Contents

* 1 Criteria
* 2 See also
* 3 References
* 4 External links

## Criteria

Analysts compute return on equity (ROE) by dividing a company's net income into average common equity. To be classified as a growth stock, analysts generally expect companies to achieve a 15 percent or higher return on equity.[2] CAN SLIM is a method which identifies growth stocks and was created by William O'Neil a stock broker and publisher of Investor's Business Daily.[3] In academic finance, the Fama–French three-factor model relies on book-to-market ratios (B/M ratios) to identify growth vs. value stocks.[4] Some advisors suggest investing half the portfolio using the value approach and other half using the growth approach.[5]

## See also

* Alternate stock categorizations:
* Turnaround stock
* Value stock
* Treatment of growth:
* Sustainable growth rate § From a financial perspective
* Stock valuation § Growth rate
* Earnings growth
* PEG ratio
* PVGO
* Valuation using discounted cash flows § Determine the continuing value
* Benjamin Graham formula

## References

1. ↑ "Top Growth Stocks". InvestingDaily.com. http://www.investingdaily.com/glp/32175/investing-in-growth-stocks-top-momentum-stocks-to-own-now.html.
2. ↑ "Sivy on Stocks". CNNMoney.com. 2004-08-06. https://money.cnn.com/2004/08/06/commentary/mkcommentary/sivyguide_six_guestions/index.htm.
3. ↑ O'Neil, William J. (2002). How to Make Money in Stocks: A Winning System in Good Times or Bad. The McGraw-Hill Companies. ISBN 978-0-07-137361-6. https://archive.org/details/howtomakemoneyin00mcgr.
4. ↑ Fama, Eugene F.; French, Kenneth R. (1998). "Value versus Growth: The International Evidence". The Journal of Finance (American Finance Association, Wiley) 53 (6): 1975–1999. doi:10.1111/0022-1082.00080. ISSN 0022-1082. http://www.jstor.org/stable/117458. Retrieved 2021-12-28.
5. ↑ "Multi-Style Investing: A Tale Of Two Investment "Styles"". Bernstein Global Wealth Management. 2004-07-22. http://www.bernstein.com/public/story.aspx?cid=744&nid=185.

## External links

* How to Find the Ultimate Growth Stock

* v
* t
* e

Financial markets

Types of markets|

* Primary market
* Secondary market
* Third market
* Fourth market

Types of stocks|

* Common stock
* Golden share
* Preferred stock
* Restricted stock
* Tracking stock

Share capital|

* Authorised capital
* Issued shares
* Shares outstanding
* Treasury stock

Participants|

* Broker-dealer
* Day trader
* Floor broker
* Floor trader
* Investor
* Market maker
* Proprietary trader
* Quantitative analyst
* Financial law
* Regulator
* Stock trader

Exchanges|

* Electronic communication network
* List of stock exchanges
* Trading hours
* Multilateral trading facility
* Over-the-counter

Stock valuation|

* Alpha
* Arbitrage pricing theory
* Beta
* Bid–ask spread
* Book value
* Capital asset pricing model
* Capital market line
* Dividend discount model
* Dividend yield
* Earnings per share
* Earnings yield
* Net asset value
* Security characteristic line
* Security market line
* T-model

Trading theories
and strategies|

* Algorithmic trading
* Buy and hold
* Contrarian investing
* Day trading
* Dollar cost averaging
* Efficient-market hypothesis
* Fundamental analysis
* Growth stock
* Market timing
* Modern portfolio theory
* Momentum investing
* Mosaic theory
* Pairs trade
* Post-modern portfolio theory
* Random walk hypothesis
* Sector rotation
* Style investing
* Swing trading
* Technical analysis
* Trend following
* Value averaging
* Value investing

Related terms|

* Block trade
* Cross listing
* Dark pool
* Dividend
* Dual-listed company
* DuPont analysis
* Efficient frontier
* Flight-to-quality
* Government bond
* Haircut
* Initial public offering
* Long
* Margin
* Market anomaly
* Market capitalization
* Market depth
* Market manipulation
* Market trend
* Mean reversion
* Momentum
* Open outcry
* Position
* Public float
* Public offering
* Rally
* Returns-based style analysis
* Reverse stock split
* Share repurchase
* Short selling
* Slippage
* Speculation
* Stock dilution
* Stock exchange
* Stock market index
* Stock split
* Trade
* Uptick rule
* Volatility
* Voting interest
* Yield

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