Stock market basics · updated October 21, 2026
What are growth stocks
Growth stocks belong to companies that grow their sales and profit much faster than the rest of the market. Investors pay a lot for them today, for the profit they expect a few years from now.
How it works
You can spot them by a few signs: sales growing 15-20% a year or more, a high P/E, a small dividend or none at all (profit is reinvested) and, often, a business in technology, healthcare or new consumer trends. The return comes almost entirely from the rising price.
Worked example
What the numbers of a growth stock usually look like:
At a P/E of 40, the price only makes sense if profit keeps growing fast for several years.
Worth knowing
Growth stocks gain a lot when interest rates fall and lose a lot when rates rise, because their value depends on profits far in the future.
When growth stocks can fool you
Growth that slows down: when a company goes from +30% to +10% a year, the price can fall hard even if the business is good. Losses hidden in expectations: many growth companies are not profitable yet.
Related terms
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Questions about growth stocks
What is the difference between growth and value stocks?
Growth stocks are expensive today, for future growth. Value stocks are cheap relative to today's profit, but grow more slowly.
Do growth stocks pay dividends?
Rarely, and not much. They use their profit to grow faster.
These explanations are for information only. They are not a recommendation to buy or sell.
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