Growth Stocks

These are stocks in companies that are considered to be “growing”. These companies may be delivering new products and services, or entering new markets.

These are stocks in companies that are considered to be “growing”. These companies may be delivering new products and services, or entering new markets.

Investors view these companies as having a lot of potential to grow fast, so are willing to pay a higher price for their shares today because they expect big things tomorrow. Basically, investors expect their share price to grow significantly.

Growth stocks tend to have a high price-to-earnings (P/E) ratio, and are unlikely to pay dividends because they are reinvesting their profits to drive growth. There is potential for big returns but also higher risk of losses.

Tech companies, such those operating in the artificial intelligence (AI) or electric vehicle (EV) space, are viewed by some investors as “growth stocks”.

Growth stocks differ to value stocks.

More terms

Investment Trust

A company that pools money together from multiple investors and then invests it.
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Venture Capital

A type of financing that investors provide to startups, who sometimes announce getting said financing in TechCrunch, to big fanfare.
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Income statement

A summary of a company's income and expenses over a set period of time.
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Dirty price

The total price payable on the purchase of a gilt. It’s calculated as the clean price plus accrued interest.
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Real Estate Investment Trust (REIT)

An investment trust specialised in investing in commercial property such as parking garages or GP offices.
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Spot Rate

The currency exchange rate a bank quotes, valid with immediate effect.
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Forward pricing

Mutual funds are traded on a forward pricing basis, meaning the price you see will be different to the price you may trade at.
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Rate of Return

Profit on an investment, expressed as a percentage of the investment.
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Gross Margin

The difference between a company's revenue and the cost to produce its goods/services, divided by revenue.
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