emerging growth stock


Growth Stock

Share in a company performing better, or expected to perform better, than its industry or the market as a whole. Shares generating a return on equity of greater than 15% are generally classified as growth stocks, but not all growth stocks are classified as such. Such stocks usually pay little to nothing dividends as the companies reinvest most of their earnings. Some believe that many or most growth stocks are overvalued, citing for example the large number of growth stocks during the dotcom bubble.

emerging growth stock

The common stock of a relatively young firm that is operating in an industry that has very good growth prospects. Although this kind of stock offers unusually large returns, it is very risky because the expected growth may not occur or the firm may be swamped by the competition.Keys to spotting a good emerging growth stock

Keep these points in mind:

  1. High percentage of management ownership. If management has a vested interest, its commitment to succeed will be all the stronger.
  2. What stage is the overall industry in?
  3. More important, where is the target stock focusing its efforts within the industry?
  4. What will be the industry leader's reaction to another player?
Steven Flagg, Senior Vice President—Investments, UBS PaineWebber, Mount Kisco, NY