Growth Industry. MarketCheese

Growth Industry — is an industry that experiences a period of high growth and flow of investments. These are emerging sectors of economy that have never existed before. The absence of competition provides the economic growth of such industries. Nowadays, most of the growth industries have relation to the internet and mobile technologies.

Definition of Growth Industry

The growth industry is an economic sector that develops quite fast. It is related to the development of new technology. This sector creates the conditions for the foundation of numerous startups and the appearance of new professions.

The growth industry has several characteristic traits:

Rise of startups. The growth industry creates a positive environment for numerous projects of different types.
High profitability. The projects in the growth industries, in general, are quite beneficial. The startups become stable companies within a short period.
Investment attractiveness. Investing in the growth industries returns a high profit, that's why the investors put money in this sector.
Attraction of human capital. The work in growth industries is well-paid, so these spheres attract many professionals.
Technical innovations. The growth industries create a huge number of new technologies.

It is necessary to calculate the CAGR (Compound Annual Growth Rate) of a certain sector to identify the growth industry. It is expressed as a percentage. CAGR shows how the studied parameter increases per year. The formula of CAGR includes the ending value, the beginning value, and other metrics.

The main advantages of the CAGR indicator are its simplicity and the versatility of its usage. CAGR shows an increase over several years, with each year's increase being added to the original value. Also, it indicates how much income an investment earns after the reinvestment in profit. CAGR can be used both to evaluate the effectiveness of investments and to compare the returns of different types of investments. Business owners can use the CAGR to analyze various business metrics, including market share, revenue, and customer satisfaction.

Application of CAGR:

Calculation of the average return on investment funds.
Checking the performance of investment consultants.
Comparison of historical returns on stocks, bonds, and deposits.
Forecasting of future values based on a series of data.
Analysis of the behavior of various business indicators (sales, costs, productivity).

However, CAGR has some disadvantages. It doesn’t consider the volatility. Besides, it works for historical data, but it can’t predict future data.

Modern Growth Industries

Today there are a huge number of growth industries that attract investors. The assets of major companies working in these fields provide a high level of profit.

Major growth industries:

Cloud computing. Cloud storage and processing becomes a promising industry because the data amounts grow at an exponential rate. The physical mediums aren’t enough. The technology of cloud computing allows companies to store a large amount of data remotely and work from any place in the world.

Biotechnology. Biotechnology is a science that studies the methods of using living organisms, their systems, or products of their vital activity to solve technological problems. Also, biotechnology is related to the creation of living organisms with the necessary properties by genetic engineering.

Data analysis. The amount of data today is quite big, so there is a need for artificial intelligence that can process all this data. Data analysis is necessary for working with big amounts of numeric data and gathering statistics. It allows companies to transform a set of data into conclusions, based on which they can make decisions.

Artificial intelligence. This technology is aimed to create machines that can recognize human speech and objects, communicate with humans, and write texts. Artificial intelligence should help to perform several simple functions and replace humans in jobs that don't require creativity, or where high accuracy is needed.

Renewable energy. The extraction of nonrenewable resources becomes unsustainable, so the governments pay attention to the utilization of renewable energy sources like sun, wind, geothermal sources, and biofuel. The usage of renewable energy implies the usage of ongoing processes in the environment or organic resources.

Pharmaceuticals. Overpopulation has caused a range of pandemics, so the development of pharmaceuticals is highly important today. Another significant direction of pharmaceuticals’ development is a prolongation of human activity and the fight against age-related diseases (Alzheimer's disease, Parkinson’s disease, cancer).

Internet of things (IoT). This is a set of physical objects connected which can exchange data via the internet. The concept of IoT can significantly improve many spheres of our lives and help us create a more convenient and secure world. The well-known examples of IoT are smartwatches, smart homes, and smart factories.