Growth Rates

Loading the player...

DEFINITION of 'Growth Rates'

The amount of increase that a specific variable has gained within a specific period and context. For investors, this typically represents the compounded annualized rate of growth of a company's revenues, earnings, dividends and even macro concepts - such as the economy as a whole.

Expected forward-looking or trailing growth rates are two common kinds of growth rates used for analysis.

BREAKING DOWN 'Growth Rates'

Different types of industries have different benchmarks for rates of growth. For instance, companies that are on the cutting edge of technology would be more likely to have higher annual rates of growth compared to a mature industry, like retail sales.

The use of historical growth rates is one of the simplest methods of estimating future growth. However, historically high growth rates don't always mean a high rate of growth looking into the future, because industrial and economic conditions change constantly.

For example, the auto industry has higher rates of revenue growth during good economic times. However, in times of recession, consumers would be more inclined to be frugal and not spend disposable income on a new car.

RELATED TERMS
  1. Exogenous Growth

    The belief that economic growth arises due to influences outside ...
  2. Annual Return

    The return an investment provides over a period of time, expressed ...
  3. Earnings

    The amount of profit that a company produces during a specific ...
  4. Growth Stock

    Shares in a company whose earnings are expected to grow at an ...
  5. Time-Weighted Rate of Return

    A measure of the compound rate of growth in a portfolio. Because ...
  6. Organic Growth

    The growth rate that a company can achieve by increasing output ...
Related Articles
  1. Stock Analysis

    The Top 5 Large Cap Technology Stocks for 2016 (FB, GOOG)

    Discover the top five tech stocks to buy in 2016, or even before, including four blue-chip American giants and one Chinese powerhouse.
  2. Mutual Funds & ETFs

    The Top 3 Convertible Bond ETFs for 2016 (CWB, ICVT)

    Obtain detailed information on the exchange-traded funds (ETFs) available for traders seeking ETF exposure to convertible bond investments.
  3. Stock Analysis

    Procter & Gamble's 3 Key Financial Ratios (PG)

    Understand how sales growth has become a bigger challenge for Procter & Gamble and what impact it has on the company's profitability and stock valuation.
  4. Stock Analysis

    Dish Network's 3 Key Financial Ratios (DISH)

    Understand why some key financial ratios for Dish Network are universally worse than its peers' and the industry average and how Dish may change all that.
  5. Stock Analysis

    Sears's 3 Key Financial Ratios (SHLD)

    Understand how negative numbers related to Sears' sales, earnings and shareholders' equity may help explain the company's business predicaments.
  6. Stock Analysis

    General Electric's 3 Key Financial Ratios

    Understand the fundamental business reasons behind some of GE's lackluster financial ratios and know how to interpret the stock's lofty valuation multiples.
  7. Stock Analysis

    The 3 Best Buy-and-Hold Canadian Stocks

    Learn how the market is misreading Canadian stocks and how long-term buy-and-hold investors can stand to benefit from the misrepresentation.
  8. Markets

    PEG Ratio Nails Down Value Stocks

    Learn how this simple calculation can help you determine a stock's earnings potential.
  9. Stock Analysis

    Why Walmart's Stock Price Keeps Falling (WMT)

    Learn about the factors that have led to Wal-Mart's stock underperformance and what the company's moves in 2015 could mean for its future.
  10. Stock Analysis

    Is It Too Late to Get Into the Netflix Frenzy? (NFLX, GOOG)

    Explore the current state of Netflix and the question of whether its sharp rise in share price over a two-year period means it is too late to buy the stock.
RELATED FAQS
  1. How is a company's share price determined?

    A company's share price is theoretically determined by the summation of the company's expected future dividends as calculated ... Read Full Answer >>
  2. In the context of a startup, what is sustainable growth?

    Sustainable growth is the maximum growth rate a startup can maintain internally without the need to seek external financing, ... Read Full Answer >>
  3. How can I calculate the value of a stock as per the Gordon Grown Model, using Excel?

    The Gordon growth model, or the dividend discount model, is a model used to calculate the intrinsic value of a stock based ... Read Full Answer >>
  4. How do I use the PEG (price to earnings growth) ratio to determine whether a stock ...

    The PEG ratio, or price/earnings to growth ratio, is a good tool for determining stock valuation when you need to make a ... Read Full Answer >>
  5. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  6. Do interest rates increase during a recession?

    Interest rates rarely increase during a recession. Actually, the opposite tends to happen; as the economy contracts, interest ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center