Growth Stock

Growth Stock
The stock of a company that maintains consistently faster-than-average growth. Although lots of smaller firms grow fast, on Wall Street ""growth stock"" tends to refer to some large, established firms whose identities or brands are household words. These have included Coca-Cola Co., General Electric, Philip Morris Cos. and Wal-Mart Stores, among many others. Growth stocks tend to have higher P/E ratios than the overall stock market because investors expect more from them and are willing to pay for reliable growth. Probably another reason for these high prices is that the Standard & Poor's 500 happens to include many of these stocks, and index investing based on the S&P 500 has boomed. Thus, many more investors are coming to hold growth stocks, however passively.

It's worth remembering that no growth stock is a growth stock forever.



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