Growth Company
General Information

Growth Company

A growth company is one which (a) will be expanding its business and it profits at more than average rate, and (b) will in the course thereof be investing a large part of its profits back in the business. It’s hard to tell how good your knowledge is in these companies because growth stocks lead to the future, and you don’t really ever have any knowledge of the future. You may have a more expert guess than others, but it’s still a guess. And many mistakes have been made in buying growth stocks on the theory that the future will duplicate the past.

The risk is basically related to paying a higher price for a security in terms of its past and current earnings and dividends than you would for a non-growth security, and there is always a possibility of disappointment. The company would have to be better than the average company to justify the price you pay for it. Maybe it won’t be, but you think it will.

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