Growth Company

AAA

DEFINITION of 'Growth Company'

Any firm whose business generates significant positive cash flows or earnings, which increase at significantly faster rates than the overall economy. A growth company tends to have very profitable reinvestment opportunities for its own retained earnings. Thus, it typically pays little to no dividends to stockholders, opting instead to plow most or all of its profits back into its expanding business.

INVESTOPEDIA EXPLAINS 'Growth Company'

Growth companies are most often seen in the technology industries. The quintessential example of a growth company is Google, which has grown revenues, cash flows and earnings by leaps and bounds since its initial public offering. Growth companies such as Google are expected to increase profits markedly in the future, and thus the market bids up their share prices to high valuations. This contrasts with mature companies, such as diversified utility companies, which see very stable earnings with little to no growth.

RELATED TERMS
  1. Law Of Large Numbers

    In statistical terms, a rule that assumes that as the number ...
  2. Price-Earnings Ratio - P/E Ratio

    A valuation ratio of a company's current share price compared ...
  3. Growth Industry

    A sector of the economy experiencing a higher-than-average growth ...
  4. Mature Industry

    An industry which has passed both the emerging and the growth ...
  5. Price-To-Innovation-Adjusted Earnings

    A variation of the price-to-earnings ratio (P/E ratio) that takes ...
  6. Fair Value

    1. The estimated value of all assets and liabilities of an acquired ...
Related Articles
  1. Is Growth Always A Good Thing?
    Markets

    Is Growth Always A Good Thing?

  2. Venturing Into Early-Stage Growth Stocks
    Investing

    Venturing Into Early-Stage Growth Stocks

  3. Pin Down Stock Price With Real Options
    Investing Basics

    Pin Down Stock Price With Real Options

  4. The Amateur Investor's Guide To Analyzing ...
    Markets

    The Amateur Investor's Guide To Analyzing ...

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center