This is a good term to add to the stock lingo archives here at ST101 as it relates to fundamental analysis. Organic growth is known to be the true factor when looking at a company’s core growth.
How companies go about attaining organic growth is by increasing output internally. Sales would be a prime example of organic growth. If a company goes out and acquires, or buys out, another company, that is not considered organic growth. Why? Because though they bring about profits, the profits were not generated from within the company, thus not organic.
What is the opposite of organic growth? Inorganic, which is growth from external events such as mergers, takeovers, acquisitions, etc. Inorganic growth can be a quick way to increase the bottom line numbers of a company, but just because is company is worth more doesn’t mean it is making more. One of the toughest challenges come with the actual integration of one company into another.
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