Growth companies


    What is a growth company?

    A growth company is one that generates substantial earnings and is growing those earnings significantly faster than the economy is growing overall.

    Growth companies are usually leaders in their field i.e. they are growing faster than their competitors. They tend to pay small, irregular or no dividends because they reinvest the majority of their profits to facilitate further growth.

    What type of company is a growth company?

    Growth companies are often small companies with plenty of room for swift development. They may have an innovative product or service, or occupy a fashionable niche with strong growth potential.

    These companies are frequently found in the technology sector, with high-profile examples including Apple and Google.

    Why are growth companies attractive to investors?

    The share price of growth companies can increase rapidly as the company expands and investors are often keen to buy early so that they can profit from that increase.

    Eventually, however, growth will reach a certain level and begin to even out. From there the company will grow more gradually and may begin to pay out larger or more regular dividends. It no longer needs to reinvest all its earnings and investors who have held onto their shares throughout the period of growth may now be able to enjoy a regular source of additional income.

    Where can you find information about growth companies?

    You can monitor the financial press to find out the latest information about growth companies and growth industries.