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Glossary
Styles

Growth investing

Paying a high price today for a much larger business tomorrow.

Growth investors accept expensive-looking multiples because they expect earnings to expand rapidly enough to justify them. When it works, it works spectacularly, because compounding earnings and an expanding multiple multiply together.

The risk is entirely in the assumption. Growth mean-reverts, competition arrives, and a company priced for 30% growth that delivers 12% can halve without anything actually going wrong.

Figure

The order matters more than the maths

Do I understand how it makes money?1st
Does it actually make money?2nd
Will it survive a bad year?3rd
Is it cheap?last

Cheapness is the last question. Ask it first and you produce a list of companies the market has given up on, and it is usually right.

Why it matters

Most of the best-performing shares of the last thirty years looked expensive the entire way up.

The mistake everyone makes

Assuming high growth persists. It is the least persistent statistic in finance.

Related terms

PEG ratio
The P/E adjusted for how fast earnings are growing.
Value investing
Buying a business for meaningfully less than you think it is worth.
P/E ratio
How many years of current profit you are paying for the shares.

See Growth investing on a real company

SteadyShares pulls this straight from the filings for 1,100+ companies, alongside moat scores, DCF fair value and peer comparison. Free to look around.

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