What Is Growth Investing?
Growth investing means buying companies that are growing revenue and profit much faster than average, even if their shares look expensive today.
What growth investors look for
- Fast, steady revenue growth.
- A large market with room to keep growing.
- Rising margins as the company gets bigger.
- A strong product and an economic moat.
The risks
Growth stocks often trade at high P/E or price-to-sales ratios. If growth slows even a little, the price can fall hard. They also tend to drop more when interest rates rise.
Growth vs value investing
Value investors look for bargains today. Growth investors pay up for tomorrow. Many successful investors blend both: they want growth, but at a sensible price. The PEG ratio helps with that.
See it in real companies
Open a company to see what it sells and how it makes money.
Related terms
Growth vs value stocksFast growers versus cheap, steady companies.
Value investingBuying good companies for less than they are worth.
PEG ratioP/E adjusted for growth.
Total addressable marketHow big the market could ever get.
Price-to-salesPrice compared with revenue, not profit.
CAGRThe average yearly growth rate over many years.