Growth stock

There is no official definition and no register of growth stocks. Index providers each apply their own screens, typically some combination of historical sales growth, earnings growth and internal growth rates, to sort a universe into growth and value buckets, and two providers screening the same market produce overlapping but different lists. What the companies tend to share is that earnings are retained and reinvested rather than distributed, so a dividend is small or absent.

The pricing follows from that. Valuation multiples, price against earnings or price against sales, sit high relative to the market because the price reflects earnings expected years out rather than the ones reported last year. That makes the share price sensitive to two separate things at once: whether the growth actually arrives, and the rate at which distant earnings are discounted back to today, which moves with interest rates. A growth stock can therefore fall hard on a rate move with no company news at all, which surprises readers who expect a share price to track the business.

The growth and value split is a convention rather than a property of a company. A name migrates between the buckets as its price and its growth rate change, the same name can sit in both at different providers, and the label describes the company's financial profile, never the direction of its share price. A growth company whose growth slows is not reclassified quickly, and the gap between the label and the underlying business is where most of the disagreement about the category lives.