Investors use several strategies to make money in the stock market. Growth stocks are the financial land of opportunities to make money in the market. Finding growth stocks is part art – stocks that have the potential of high share price growth over some time but sell for relatively cheap for now.
What is a Growth Stock?
Growth stocks is a company that has the potential to increase their profits at a faster rate compared to average business in its market in general. These stocks do not pay dividends, because the users of growth stocks are companies that believe in the reinvestment of their earnings to accelerate growth in the short term. Investors investing in growth stocks will earn money through capital gains when they sell their shares in the future. But keep in mind, the companies with high growth potential comes with both reward and risk. You need to know how to minimize risk before getting started with a growth stock investing strategy.
Where to look for Growth Stocks?
When you look at the list of high growth stocks, many companies were not on the list a few decades ago but now are at the top. Amazon, Netflix, Johnson & Johnson all started with a tiny investment in their respective markets but now with their huge revenue and profit growth, they stand at the top.
Choosing the Best Growth Stocks:
The first step to choosing a good growth stock for your portfolio is to identify their characteristics. For example, the numerical performance quality of growth stocks is good when compared to other stocks. Here are some characteristics of a good
growth stock opportunity:
They Have Good Financial Fundamentals:
Companies with fundamental analysis growth stock should cover the following areas:
● The balance sheet: This maintains the capital, liabilities, and assets of the company, and includes the balance of the company’s income and expenditure at any specific point in time.
● Cash flow: A company’s cash flow represents the amount of cash gain and utilized by the company. It’s a key to financial growth prospects, and generate the positive cash flow in the company that leads to an increase in share price growth.
● Income Statement: An income statement is a basic document that records the company’s profit and loss. It reports expenses, revenues, gains, losses., and net the income of the company in a specific period.
The Trendsetter Company:
Netflix and Starbucks are good examples of growth companies and trendsetters. Netflix is in trend with its video streaming invention and Starbucks has the concept of chain gourmet coffee and became a home office for millions of freelancer workers. Trends matter when it comes to select a good growth stock company.
The Company’s Share Price is Trending Upwards:
Take a look at the recent trading history of the company; that reveals the growth stock of it. If a company is showing a stock history of higher highs and higher lows, this shows that the company is moving upwards ind trends with high investors and is ready to take off.
