What are growth company and growth stock?

Companies are usually classified depending on the changes in sales and earnings, or investments’s rates of returns

A growth company is a firm which makes investments as the yield rates of return are greater than the firm’s required rate of return. The required rate of return is WACC. In addition, the firms which have above-average  increases in sales and earnings are also called as growth company.

A growth stock is a stock with a higher rate of return than other stocks in the market with similar risk characteristics. The growth stock achieves this superior risk-adjusted rate of return because at some point in time the market undervalued it compared to other stocks.