Growth investors look for assets that are expanding at a rapid rate, taking market share, creating new industries or growing financial metrics like revenue and free cash flow faster than the industry average. Growth investors are often interested in momentum, both from a technical perspective and a fundamental perspective. They want to see growth trajectories up and to the right for the foreseeable future.
Growth investing and trading consists of several subcategories including the analysis of historical earnings, GARP (growth at a reasonable price), industry market share, revenue growth rates, return on invested capital, momentum, and technological innovation. Value investing and growth investing are said to be opposite strategies. Value investing looks for undervalued assets and growth investing looks for assets that might actually be overvalued on paper, but undervalued over the long-term because of its growth rates.
Growth investing is a difficult strategy. An asset may look expensive on paper, but to growth investors the asset is just discounting its future growth plans. Growth investors often ignore traditional metrics like P/E ratio or P/S ratio and instead look for growth rates and how that growth could compound over time.
