Growth stocks are stocks of companies that are expected to increase sales and earnings at a faster rate than the market average.
Growth stocks often seem expensive because they trade at high P/E ratios, but in fact, such valuations can be cheap if the company continues to grow rapidly, causing the share price to rise.
Since investors pay a high price for growth stocks based on expectations, if those expectations are not met, growth stocks could fall sharply.
Growth stocks do not usually pay dividends.
Growth stocks are often contrasted with value stocks.