Glossary · Defined term
Growth stock
A growth stock is a share of a company expected to grow faster than average, usually reinvesting profits instead of paying dividends.
Last updated Oct 2, 2026
What it means
A growth stock is a share of a company expected to expand revenue and earnings faster than the market average. Growth companies typically reinvest their profits into the business rather than paying dividends, funding product development, hiring, and expansion. Investors buy them for the promise of future earnings, not for current income.
Because the price reflects years of expected growth, growth stocks trade at high valuation multiples such as elevated price-to-earnings ratios. That makes them sensitive to interest rates: when rates rise, the present value of distant future earnings falls, and growth stocks often sell off harder than the rest of the market. They also tend to be more volatile around earnings reports.
Growth and value are the two classic investing styles, and they take turns leading the market. Growth dominates when the economy is expanding and capital is cheap; value tends to hold up better when rates rise or growth slows. Most diversified portfolios hold some of each rather than betting entirely on one style.
An example
For illustration, a software company growing revenue 30% a year, paying no dividend, and trading at 40 times earnings is a textbook growth stock. Investors are paying up today for earnings they expect to arrive years from now.