Where Would You Find Growth Stock and Emerging Growth Stock?
The term 'growth stock' has been a victim of occasional misunderstandings.
Some apprehend growth stock as a name stock that has a lot of demand.
There are others who think growth stocks are those stocks which sell at high earning multiples.
But belonging to a popular company or having a name does not form a necessary synonym for true growth.
More often than not it can be a stock which has gone past its period of growth.
It is a natural tendency for investors to go too far with their preference for popular stocks.
During the period of market excesses, there happens to be a popular misconception that growth stocks are always beyond the reasonable or acceptable price-earning ratio.
This P/E ratio is considered to be the basic criteria to evaluate the stock prices.
Growth stocks and the 'emerging growth stocks' are actually well-managed companies which operate in industries whose earnings and dividends grow at a faster rate than the expected estimates.
It does not get buoyed down by the inflation and the shaky condition of the over-all economy.
Their extraordinary and positive growth momentum ought to be equally maintained both during economic affluence and economic poverty.
Contrary to popular belief, growth stocks are not to be found in the traditional popular sectors.
They rather belong to newer upcoming sectors like the telecommunications, health care, computers and bio-technology.
Major characteristic features of growth stocks include: oThey have a higher price/earning ratio compared to the market average oThey possess a substantial potential for long term price appreciation and its ability to remain above-average.
oTheir price levels are volatile oThey conserve their capital for future growth.
So, there is no dividend payout.
How do you ascertain that it is an emerging growth stock? For this: oYou need to shun those companies which are two down in the earning years during the past five years oThe company should have a minimum average of 20% revenue and a constant earning growth oYou are required to stay clear of those firms which have a return of average equity that is below 13%.
oThose companies whose debt is more than 30% of its total capital should be avoided.
An expert growth stock hunter will naturally know that he will not gain any excess return from investment truly and will try 'blue chip' stock representative of a main stream stock index like, the Dow Jones Industrial Average and the S & P 500.
He will rather explore the stock market to get hold of the next growth stock, that which may well become the next Google.
Some apprehend growth stock as a name stock that has a lot of demand.
There are others who think growth stocks are those stocks which sell at high earning multiples.
But belonging to a popular company or having a name does not form a necessary synonym for true growth.
More often than not it can be a stock which has gone past its period of growth.
It is a natural tendency for investors to go too far with their preference for popular stocks.
During the period of market excesses, there happens to be a popular misconception that growth stocks are always beyond the reasonable or acceptable price-earning ratio.
This P/E ratio is considered to be the basic criteria to evaluate the stock prices.
Growth stocks and the 'emerging growth stocks' are actually well-managed companies which operate in industries whose earnings and dividends grow at a faster rate than the expected estimates.
It does not get buoyed down by the inflation and the shaky condition of the over-all economy.
Their extraordinary and positive growth momentum ought to be equally maintained both during economic affluence and economic poverty.
Contrary to popular belief, growth stocks are not to be found in the traditional popular sectors.
They rather belong to newer upcoming sectors like the telecommunications, health care, computers and bio-technology.
Major characteristic features of growth stocks include: oThey have a higher price/earning ratio compared to the market average oThey possess a substantial potential for long term price appreciation and its ability to remain above-average.
oTheir price levels are volatile oThey conserve their capital for future growth.
So, there is no dividend payout.
How do you ascertain that it is an emerging growth stock? For this: oYou need to shun those companies which are two down in the earning years during the past five years oThe company should have a minimum average of 20% revenue and a constant earning growth oYou are required to stay clear of those firms which have a return of average equity that is below 13%.
oThose companies whose debt is more than 30% of its total capital should be avoided.
An expert growth stock hunter will naturally know that he will not gain any excess return from investment truly and will try 'blue chip' stock representative of a main stream stock index like, the Dow Jones Industrial Average and the S & P 500.
He will rather explore the stock market to get hold of the next growth stock, that which may well become the next Google.
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