Growth Firm


DEFINITION of 'Growth Firm'

A company that is growing at a rapid pace compared to its peers or to the broad economy. Although there is no hard-and-fast rule for defining growth, a growth firm generally has the capability to increase annual revenues by more the industry average over a sustained period. A firm would not be classified as a growth firm on the basis of a one-time surge in revenues; rather, growth has to be demonstrated over a number of years.


Growth firms have the ability to scale up their business very rapidly. One consequence of this rapid growth is that the firm's balance sheet may come under significant pressure as capital demands escalate in line with business growth. While growth firms in the early stages may not be profitable, investors are generally willing to take a longer-term view in the expectation that rapid revenue growth will eventually translate into increasing profits and cash flow.

Growth firms can be found in any sector, but they tend to be clustered in areas such as technology and life sciences. As some of the biggest and most successful companies such as Apple and Google demonstrated in the past, size is also no barrier to being a growth firm.

  1. Conservative Growth

    An investment strategy that aims to grow invested capital over ...
  2. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  3. Growth Fund

    A diversified portfolio of stocks that has capital appreciation ...
  4. Growth Rates

    The amount of increase that a specific variable has gained within ...
  5. Growth Stock

    Shares in a company whose earnings are expected to grow at an ...
  6. Growth Industry

    A sector of the economy experiencing a higher-than-average growth ...
Related Articles
  1. Markets

    Is Growth Always A Good Thing?

    Getting big quickly looks good, but companies can get into trouble when they do it too fast. Find out how to spot this trouble.
  2. Markets

    Great Company Or Growing Industry?

    Look at the big picture when choosing a company - what you see may really be a stage in its industry's growth.
  3. Retirement

    Thomas Rowe Price: Always Right

    This great investor mastered a new type of investing with every new market he faced.
  4. Forex Education

    How To Use The P/E Ratio And PEG To Tell A Stock's Future

    While the price-to-earnings ratio is commonly used for assessing stock prices, the price/earnings-to-growth ratio offers forecasting advantages that investors need to know.
  5. Financial Advisors

    Are Alternatives Right for Your Portfolio?

    Alternative investments are increasingly making their way into retail investors' portfolios. Are they a good fit?
  6. Fundamental Analysis

    Boost Your Portfolio by Adding 3 Turnaround Stocks

    Peter Lynch loves turnarounds. The stocks of these battered companies can offer incredible rewards if bought at the right time.
  7. Fundamental Analysis

    Buy Penny Stocks Using the Wisdom of Peter Lynch

    Are penny stocks any better than playing penny slots in Vegas? What if you used the fundamental analysis principles of Peter Lynch to pick penny stocks?
  8. Entrepreneurship

    The Top 4 Social Venture Capital Firms

    Learn how social venture capitalists are investing in companies more focused on making the world a better place to live than returns on investments.
  9. Economics

    The Pros and Cons of Being a Nonprofit

    Evaluating the tradeoffs organizations face when choosing between becoming a tax-exempt nonprofit or for-profit business with innovative ease.
  10. Investing

    Don’t Let Emerging Markets Scare You

    Concerns over global growth and rising rates have pushed emerging markets in a diversified portfolio out of this space, but our research shows otherwise.
  1. Do hedge funds invest in private companies?

    Hedge funds normally do not invest in private companies because of liquidity concerns. Capital funding for private companies ... Read Full Answer >>
  2. Who do hedge funds lend money to?

    Many traditional lenders and banks are failing to provide loans. In their absence, hedge funds have begun to fill the gap. ... Read Full Answer >>
  3. How do you find the break-even point using a payback period?

    It does not make sense to find the breakeven point using a company's payback period. A company's payback period is concerned ... Read Full Answer >>
  4. How attractive is the food and beverage sector for a growth investor?

    The food and beverage sector is attractive for a growth investor. The sector's high degree of volatility means it tends to ... Read Full Answer >>
  5. What techniques are most useful for hedging exposure to the insurance sector?

    Investing style determines the best hedging techniques for the insurance sector. This sector comprises three segments, two ... Read Full Answer >>
  6. How attractive is the retail sector for a growth investor?

    Retail is an attractive sector for a growth investor due to its propensity for turning in bigger-than-average gains when ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center