Growth shares are equity stakes in companies that prioritise reinvesting their earnings back into the business rather than paying out dividends. Instead of rewarding investors with regular income today, these companies channel capital into research, market expansion, and innovation — all aimed at driving outsized earnings growth over time.
On the Australian Securities Exchange (ASX), growth shares typically sit within sectors like technology, healthcare, biotechnology, and software. These are industries where rapid scaling is possible, and addressable markets are large.
What sets growth shares apart from income or value shares is their forward-looking nature. Investors are essentially backing a business’s potential for growth over the next five, ten, or twenty years — not its current value.
Figure 1: Growth shares are stakes in companies that reinvest profits into expansion and innovation instead of paying dividends, aiming to deliver higher long-term earnings growth rather than immediate income.
How Do Growth Shares Actually Work?
When you purchase ASX growth shares, you are acquiring an ownership stake in a company that is deliberately choosing to forgo near-term profitability in favour of long-term scale.
The mechanics are straightforward. As the company expands its revenue base, grows its customer numbers, and increases its earnings power year after year, the market rewards that performance with a progressively higher share price.
The engine driving these gains is compounding. A business that consistently grows revenue at 20 to 30 per cent annually can multiply shareholder wealth dramatically over a decade — even from a modest initial investment.
This is also why growth shares tend to trade at elevated price-to-earnings (P/E) ratios. Investors are willing to pay a premium today because they are pricing in earnings that have not yet materialised. When the company’s growth trajectory is genuine and durable, that logic holds up well over time.
Standout Examples From the ASX
Two of the better-performing shares from the local market right now illustrate how growth investing can work across very different sectors.
BHP Group Ltd (ASX: BHP) is the standout performer on the list, with its share price surging approximately 45 per cent over the past 52 weeks. The mining giant hit an all-time high of $58.29 on 26 February 2026 after reporting a stronger-than-expected first-half result, with copper now contributing 51 per cent of underlying EBITDA.
BHP’s pivot into copper, driven by surging demand from AI infrastructure and the global energy transition, has repositioned it as a compelling growth story within the resources sector. The company also lifted its interim dividend by 44 per cent, reflecting growing confidence in its earnings trajectory.
Figure 2: BHP Group building in Adelaide, Australia [Original Image: Reuters]Â
Commonwealth Bank of Australia (ASX: CBA) had a remarkable run in 2025, reaching a 52-week high of $192.00 before pulling back from that peak. The stock’s 52-week range sits between $140.21 and $192.00, with the current price around $180, representing solid price appreciation over the period.
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Including fully franked dividends, total shareholder returns for the past 52 weeks came in around 13 per cent. CBA is Australia’s largest listed company by market capitalisation and continues to benefit from strong mortgage lending growth, record institutional bond issuance, and growing digital adoption across its customer base.
Figure 3: Commonwealth Bank Office [Original image: Shutterstock]
The Risks Investors Must Understand
Growth shares are not without significant risks, and Australian investors should approach them with clear-eyed realism.
The most obvious danger is that not every company marketed as a growth story delivers on its promise. Speculative names, particularly smaller, pre-profit technology and biotech stocks, can destroy capital just as spectacularly as quality growth shares can create it.
Quality growth companies typically carry strong balance sheets, possess a clear competitive moat, operate in expanding markets, and have a demonstrated history of revenue growth rather than perpetual promises of future profitability.
Growth shares are also highly sensitive to interest rate movements. When rates rise, the present value of future earnings falls, making growth stocks more vulnerable to sell-offs. Australian investors experienced this during the 2022 -2023 rate-hiking cycle, when many high-growth ASX names corrected sharply.
Building a Growth Share Portfolio on the ASX
For everyday Australian investors, the most sensible approach involves selectivity, patience, and diversification.
Concentrating a portfolio in only one or two names, no matter how compelling the thesis, amplifies risk considerably. Spreading exposure across multiple quality growth businesses in different sectors provides meaningful protection if one company stumbles.
Time horizon matters enormously. Growth shares are long-term investments. Attempting to trade them in and out based on short-term market movements typically erodes returns and undermines the compounding effect that makes them so powerful in the first place.
Ultimately, ASX growth shares reward investors who select quality businesses with genuine competitive advantages and hold with conviction. For those willing to embrace that approach, they remain one of the most powerful wealth-building tools available to Australian investors today.
Sources
- Mickleboro, James. “How ASX Growth Shares Could Make You Rich.” The Motley Fool Australia, 4 September 2025. https://www.fool.com.au/2025/09/04/how-asx-growth-shares-could-make-you-rich/
- Team Qapita. “Your Comprehensive Guide to Growth Shares.” Qapita Blog, 10 April 2025. https://www.qapita.com/in/blog/growth-shares
- Market Index. “BHP Group Ltd (ASX: BHP) Share Price.” https://www.marketindex.com.au/asx/bhp
- Market Index. “Commonwealth Bank of Australia (ASX: CBA) Share Price.” https://www.marketindex.com.au/asx/cba
- Market Index. “Magellan Financial Group Ltd (ASX: MFG) Share Price.” https://www.marketindex.com.au/asx/mfg
- Market Index. “BHP Rallies to All-Time High as Copper Earnings Surge, Dividend Jumps 44%.” https://www.marketindex.com.au/news/bhp-rallies-to-all-time-high-as-copper-earnings-surge-dividend-jumps-44
- Mickleboro, James. “How Did the CBA Share Price Perform in 2025?” The Motley Fool Australia, 2 January 2026. https://www.fool.com.au/2026/01/02/how-did-the-cba-share-price-perform-in-2025/
- Australian Securities Exchange (ASX). “Understanding Shares.” https://www.asx.com.au/investors/learn/how-to-invest/understanding-shares
Australian Securities and Investments Commission (ASIC) — MoneySmart. “Shares.” https://moneysmart.gov.au/shares
