What defines a growth stock?

A growth stock is characterized as a stock that is expected to grow at an above-average rate compared to its industry or the overall market. Investors often seek out growth stocks with the anticipation that these companies will earn higher returns due to their potential for expansion. Growth stocks usually reinvest their earnings back into the business rather than distributing dividends, which aligns with their objective of capital appreciation.

This classification stems from key indicators such as revenue and earnings growth rates, which are generally higher than those of other companies. By focusing on these traits, investors look to capitalize on the increasing value of the stock over time, making option B the definition that accurately captures the essence of growth stocks.