Growth Traps — Why High-Growth Companies Disappoint

The graveyard of Indian equity portfolios is not filled with obviously bad companies. It is filled with former great growth companies that stopped growing — bought by investors who assumed the past would continue.

Why This Matters

Growth trap investing — buying a stock with an excellent historical growth record at peak valuations, precisely as growth decelerates — is one of the most common and most expensive mistakes in equity investing. The combination of high expectations priced into the multiple and actual growth disappointment creates a vicious double compression: earnings estimates fall and the PE multiple contracts simultaneously. Understanding the structural reasons growth companies disappoint allows you to anticipate rather than react.