Growth Rates and the Financial World Growth versus Value Stocks

Growth Stocks

Growth Stocks: Companies whose sales and earnings are growing faster than the average are growth companies. Since the company is getting bigger and more profitable, there is increased interest in these companies and investors are willing to pay "too much" for their stock, as evidenced by their higher PE ratios. The marketplace has high expectations for such a company's future, even though it may not yet even be earning a profit. Its exploding sales may have created the expectation of huge profits.