Growth Stocks vs. Value Stocks
Investors are often confused about the differences between growth stocks and value stocks. The main way in which they differ is not in how they are bought and sold, nor is it how much ownership they represent in a company. Rather, the difference lies mainly in the way in which they are perceived by the market and, ultimately, the investor.
Growth stocks are associated with high-quality, successful companies whose earnings are expected to continue growing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. The P/E ratio is the market value per share divided by the current year’s earnings per share.
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