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Finance Dictionary and Glossary of Investment Terms
Growth Rate
Definition 1.
The rate at which a company''s stock price, earnings, revenue, and/or sales has changed or is expected to change in the future. In looking at a stock, one tends to look at earnings growth and revenue growth. Earnings growth usually is the paramount consideration, and investors often look not just at a stock''s P/E ratio, but at the ratio of price to anticipated growth. This is one reason companies that report slower-than-expected earnings growth are so often pummeled on Wall Street. Staying in the realm of what is known, many investors like to see a company that has achieved consistent earnings growth; earnings growth from increased revenue rather than cost-cutting (although of course they like cutting costs); earnings growth that exceeds population growth and inflation; and earnings growth even in hard times. As for revenue growth, many of the same ideas apply, with the caveat that if revenue is growing much faster than earnings it could be a sign of aggressive discounting, out-of-control costs, unmanageably fast growth or other problems.
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