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Reading a business

Lesson 78 · Written for kid, teen, and little

Growth or Value?

Growth focuses on expected expansion; value compares price with business fundamentals.

The idea

Some companies are expected to grow quickly, and investors may pay a higher price hoping that growth continues. These are often called growth companies. Value stocks trade at relatively low prices compared with measures such as earnings or assets, but a low price can also reflect business problems. Neither label guarantees steady profits or a better return, and past growth is never a promise about the future. 🌱

A

Words to know

5

Growth company

A company whose sales and profits are rising quickly. Sales up 40% in a year makes it a growth story.

Value company

A steady company whose shares cost little compared with its earnings. Boring, cheap, and still making money.

Earnings

The profit a company makes. $3,000 kept after every cost and tax is its earnings.

Share price

What one small piece of a company costs to buy. $45 gets you one share of a $45 stock.

P/E ratio

Share price divided by earnings per share — a quick check of how pricey a share looks. A $45 share earning $3 has a P/E of 15.

Try it — no accountMatch the pairs

Match each clue to what it tells you.

0 / 4 matched

In the full lesson

  1. 1Match the pairs
  2. 2Work out the number
  3. 3Make the call

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