These are stocks in companies that are considered to be “growing”. These companies may be delivering new products and services, or entering new markets.
Investors view these companies as having a lot of potential to grow fast, so are willing to pay a higher price for their shares today because they expect big things tomorrow. Basically, investors expect their share price to grow significantly.
Growth stocks tend to have a high price-to-earnings (P/E) ratio, and are unlikely to pay dividends because they are reinvesting their profits to drive growth. There is potential for big returns but also higher risk of losses.
Tech companies, such those operating in the artificial intelligence (AI) or electric vehicle (EV) space, are viewed by some investors as “growth stocks”.
Growth stocks differ to value stocks.
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