Definition of Growth opportunity

Growth opportunity

opportunity to invest in profitable projects.

Constant-growth model

Also called the Gordon-Shapiro model, an application of the dividend discount
model which assumes (1) a fixed growth rate for future dividends and (2) a single discount rate.

Dividend growth model

A model wherein dividends are assumed to be at a constant rate in perpetuity.

Growth manager

A money manager who seeks to buy stocks that are typically selling at relatively high P/E
ratios due to high earnings growth, with the expectation of continued high or higher earnings growth.

Growth phase

A phase of development in which a company experiences rapid earnings growth as it produces
new products and expands market share.

Growth rates

Compound annual growth rate for the number of full fiscal years shown. If there is a negative
or zero value for the first or last year, the growth is NM (not meaningful).

Growth stock

Common stock of a company that has an opportunity to invest money and earn more than the
opportunity cost of capital.

Internal growth rate

Maximum rate a firm can expand without outside source of funding. growth generated
by cash flows retained by company.

Net present value of growth opportunities

A model valuing a firm in which net present value of new
investment opportunities is explicitly examined.

Opportunity cost of capital

Expected return that is foregone by investing in a project rather than in
comparable financial securities.

Opportunity costs

The difference in the performance of an actual investment and a desired investment
adjusted for fixed costs and execution costs. The performance differential is a consequence of not being able
to implement all desired trades. Most valuable alternative that is given up.

Opportunity set

The possible expected return and standard deviation pairs of all portfolios that can be
constructed from a given set of assets.

Portfolio opportunity set

The expected return/standard deviation pairs of all portfolios that can be
constructed from a given set of assets.

Present value of growth opportunities (NPV)

Net present value of investments the firm is expected to make
in the future.

Simple compound growth method

A method of calculating the growth rate by relating the terminal value to
the initial value and assuming a constant percentage annual rate of growth between these two values.

Sustainable growth rate

Maximum rate of growth a firm can sustain without increasing financial leverage.

Opportunity cost

The lost opportunity of not doing something, which may be financial or non-financial, e.g. time.

dividend growth method

a method of computing the cost
of common stock equity that indicates the rate of return
that common shareholders expect to earn in the form of
dividends on a company’s common stock

growth rate

an estimate of the increase expected in dividends
(or in market value) per share of stock

opportunity cost

a potential benefit that is foregone because
one course of action is chosen over another

opportunity cost of capital

the highest rate of return that
could be earned by using capital for the most attractive alternative
project(s) available

Opportunity cost

Lost revenue that would otherwise have been realized if a different
decision point had been selected.

constant-growth dividend discount model

Version of the dividend discount model in which dividends grow at a constant rate.

internal growth rate

Maximum rate of growth without external financing.

opportunity cost of capital

Expected rate of return given up by investing in a project.

opportunity cost

Benefit or cash flow forgone as a result of an action.

present value of growth opportunities (PVGO)

Net present value of a firm’s future investments.

sustainable growth rate

Steady rate at which a firm can grow without changing leverage; plowback ratio Ă— return on equity.

Opportunity Cost

The forgone value of an alternative not chosen, usually the most profitable alternative.

Personal Responsibility and Work Opportunity Reconciliation Act

A federal Act requiring the reporting of new hires into a national database.

Critical Growth Periods

Times in a company's history when growth is essential and without which survival of the business might be in jeopardy.

growth funds

Mutual funds that seek long-term capital growth. This type of fund invests primarily in equity securities.

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