In finance, a growth stock is a stock of a company that generates substantial and sustainable positive cash flow and whose revenues and earnings are expected to increase at a faster rate than the average company within the same industry.
[1] A growth company typically has some sort of competitive advantage (a new product, a breakthrough patent, overseas expansion) that allows it to fend off competitors.
Growth stocks usually pay smaller dividends, as the companies typically reinvest most retained earnings in capital-intensive projects.
To be classified as a growth stock, analysts generally expect companies to achieve a 15 percent or higher return on equity.
[2] CAN SLIM is a method which identifies growth stocks and was created by William O'Neil a stock broker and publisher of Investor's Business Daily.