Growth Investing
Growth investing focuses on companies expected to grow revenues and earnings faster than the market or their industry, often at the expense of current dividends.
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Definition
Growth investing focuses on companies expected to grow revenues and earnings faster than the market or their industry, often at the expense of current dividends.
Use case
Used in investment strategy workflows, analysis, and technical interviews.
Judgment check
Useful only when the assumptions and inputs behind the metric are understood.
Deep dive
How to think about Growth Investing
Growth investors prioritize future potential over current valuation metrics. Typical characteristics: high P/E ratios, low or no dividends, high reinvestment rates, innovative products/markets. Technology and healthcare are common growth sectors. Risk: high expectations can lead to severe corrections if growth disappoints.
Example: Growth investor buys Cloud Software Inc. at 50x earnings expecting 30% annual growth. If growth materializes, valuation remains supported. If growth slows to 15%, P/E might compress to 20x, causing 50%+ stock decline despite still-positive business growth.