A growth stock is a firm that is expected to grow significantly faster than the market average. These stocks usually do not pay dividends, as the firms usually want to reinvest all earnings as they want to accelerate growth in the short term, which makes these stocks riskier. Investors want to earn money through capital gains when they eventually sell their shares at higher prices. If the company does not perform well, investors incur a loss on the stock when it’s time to sell. To be classified as a growth stock, companies are usually expected to achieve a 15 percent or higher return on equity.