Growth stocks

Growth stocks are shares in a company whose earnings are expected to grow at an above average rate relative to the market.

Because these companies tend to re-invest their earnings in profitable projects, they tend not to pay a dividend. Technology companies are typical in this respect. These stocks tend to be expensive and possess high P/E and P/B ratios. See P/E and P/B ratios.

Growth stocks tend to be more volatile than other equities, as their valuation is largely dependent on growth assumptions. Thus any revisions to these assumptions can have a significant impact on the share price of a growth stock.

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