Growth Industry
Candlefocus EditorWhen a company is operating in a growth industry, their sales and revenue figures tend to be higher than average, resulting in increased stock prices and brighter market outlooks for the overall industry. This attracts the attention of investors and financiers and can create a “hype” around the sector or the company.
Growth industries tend to be volatile and risky markets, as the growth is often unpredictable and difficult to manage. That said, there can be immense rewards for those who actively participate in and invest in emerging technologies which can create value and help shape the sector.
Analysts use the concept of compound annual growth rate (CAGR) to measure and quantify the growth of a growth industry. CAGR takes into account the number of years over which growth is taking place, the rate of growth over that time period, and the total number of years in which the industry is growing. This number is used to assess the sustainability of a certain industry, as well as the companies within it.
Ultimately, companies and investors should consider whether their investments and strategies are in alignment with the long-term trends of a particular growth industry. Investing in growth industries can be a high-risk/high-reward proposition, but it is also a potential opportunity to capitalize on the potential for high returns. It’s important to understand both the risks and rewards associated with growth industries in order to make wise investment decisions.