Growth investing focuses on companies expanding revenue and earnings faster than average, betting that rapid compounding will justify a higher price today. The discipline is telling durable growth from a fad — and not overpaying for it.
What to measure
| Metric | Why it matters |
|---|---|
| Revenue growth | Is the top line genuinely expanding, year after year? |
| Earnings / FCF growth | Does growth reach the bottom line, or get spent away? |
| Reinvestment × ROIC | Sustainable growth = how much is reinvested × the return on it. |
| Total addressable market | How much room is left to keep growing. |
Quality growth vs. growth at any cost
The best growth is profitable and self-funding: a high return on invested capital means each reinvested dollar throws off more cash to reinvest again. Growth that constantly needs new debt or share issuance to survive is far more fragile.
Example: a company reinvests 50% of its profits at a 20% ROIC. Its sustainable growth rate is 0.5 × 20% = 10% a year — funded entirely from within, no new capital required.
The price you pay
Even a wonderful growth story can be a bad investment at the wrong price. Tools like the PEG ratio (P/E relative to growth) and a scenario-based DCF help you check that the market hasn't already priced in perfection.
