Definition of Growth Stocks
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| Definition Growth Stocks |
Growth stocks are the stocks of companies whose rate of growth of revenues and profits is significantly higher than the average growth rate of other companies in the same market or sector, and therefore this means that growth stocks grow faster than stocks of value companies, which in turn leads to faster growth in profits.
Properties and characteristics of growth stocks
The characteristics and advantages of growth stocks can be summarized in the following points:
- High growth rate.
- Zero or low cash dividends.
- competitive advantage.
- High brand loyalty by consumers (eg users of Apple products).
- High revenue growth (doubling).
- Risk factor (the possibility of losing reinvested profits).
Examples of growth companies
We find that among the most important examples of growth companies and their replicators (according to prices at the time of writing the article) are as follows:
- Tesla stock — 625
- Square Arrow — 384
- Shopify stock — 116
- Amazon stock — 65.73
- Netflix stock — 60.18
Finally, a high P/E does not necessarily mean that the stock is inflated or a bad sign for the company, but that may reflect the investors' optimism about the company's future and its ability to double its revenues and profits.
Therefore, it is a mistake to rely on the P/E to evaluate the stock in isolation from the rest of the financial indicators.
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