Growth stocks are shares in companies expected to grow faster than the market average. These companies reinvest earnings in expansion rather than paying dividends.
Key characteristics include high revenue and earnings growth, significantly outperforming market averages. This sustained growth signals strong business potential.
Growth stocks often have high price-to-earnings (P/E) ratios, reflecting investors' high expectations for future earnings. However, it’s important to evaluate these ratios carefully.
Companies reinvest profits in expansion, R&D, and new product launches. This strategy supports long-term growth and focuses on innovation and business development.
Growth stocks are often at the forefront of innovation, disrupting industries. Companies like Tesla and Netflix are prime examples of growth-driven success.