Glossary
Growth Stock
A growth stock is a share of a company expected to increase its revenue and earnings faster than the market average, typically trading at a high price relative to current profits.
Growth companies usually reinvest profits rather than pay dividends, so the investment case rests on future expansion. The traditional counterpart is a value stock — a company priced low relative to its current earnings or assets. Leadership between the two styles has rotated across decades.
Why it matters in practice
Because a growth stock's price embeds high expectations, it can fall sharply when results are merely good instead of great — expectation risk, distinct from business failure. Style labels matter mostly for diversification: a portfolio concentrated in one style behaves very differently from the broad market, whereas a total-market index fund holds both styles automatically and skips the rotation-timing question.
Related terms: Stock · Blue Chip · Market Capitalization · Index Fund · Volatility