What are growth stocks?
Growth stocks are typically companies that seek rapid scale by expanding product lines, improving operational efficiencies, and achieving leadership positions. While these companies can be found in every sector, most belong to industries where technology enables innovation and the delivery of new services. These industries include cloud computing, e-commerce, financial services, and healthcare.
Growth stocks can be both small and large companies, including Nasdaq-listed technology stocks, and have typically outperformed the broader market. They often offer above-average returns, as evidenced by growth benchmark indices such as the S&P 500 Growth Index over the years. However, a growth company's share price and valuation are typically high relative to its earnings and revenue, and it may not have been profitable in the past.
Investors buy growth stocks in anticipation of the companies' success. Most blue-chip stocks began as growth stocks but have since achieved a more consistent growth rate.
How risky are growth stocks?
Unlike value stocks, which tend to be cyclical , growth stocks can be more consistent. However, growth stocks may be young companies trying to achieve something big or whose products are still in the research and development phase. There's no guarantee of immediate success or profit, and there's always the risk of short-term losses. If a company doesn't achieve the major successes investors hope for, it can have a dramatic impact on its share price.
Fast-growing companies
Below is a list of 14 growth stocks available to trade as CFDs on our Next Generation trading platform , ranked by the percentage growth in annual revenue in the respective company's last fiscal year. These figures are as of February 2022.
Zoom [ZM]
Market capitalisation: $38 billion Price-earnings ratio (P/E): 34.4
Revenue: 326% year-on-year to $2.7 billionThe coronavirus pandemic turned Zoom into a household name as many people suddenly began working from home. Revenue increased 355% in the three months ending July 2020. The company closed fiscal year 2021 with net income of $672 million, up from $22 million in the same period last year. The shift to remote and flexible working has been a key driver of growth for the company. However, there are concerns about how the company will fare in a post-pandemic world.
