2007-07-28 05:48:38 · 9 answers · asked by rocd 1 in Business & Finance ➔ Investing
Growth stocks expect an increase in their value.
Value Stocks are selling for less than they are worth.
2007-07-28 05:54:33 · answer #1 · answered by Feeling Mutual 7 · 0⤊ 0⤋
The difference between growth and value stocks is mostly how investors view their potential future growth versus current valuation.
Growth stocks are stocks that are expected to have substantial future growth. This could be because they are a new company exploiting a growing trend in society and they have a good market position. Often these stocks exhibit high Price to Current Earnings (or PE) ratios. It's not uncommon to see a PE of 30 - 50, which means that the investors are projecting substantial future growth. These investors believe that the company will grow at such a rate that the PE ratio will quickly fall to a more normal level at some point in the future. You could say that Growth investors believe that E in the PE ratio will increase rapidly. One key requirement of a growth stock is that it must be in an industry or participating in a trend that is growing strongly itself.
Value stocks are companies that investors believe have a higher value than what is currently reflected in their stock price. Many times investors will look for companies that have had a string of bad luck which has caused their price to fall significantly. Sometimes, the luck (or management) changes for these companies and they resume growth and increasing profit trends. By doing extensive homework and investigation, investors believe that the valuations will increase when the rest of the market sees the results of this change. Value stocks are characterized by low current PE ratios because many other investors are focused on the past performance of the company and are not willing to pay a lot for the company. You could summarize a value stock by saying that it has a low P (or stock price). Investors in value stocks often believe that a catalyst or event will occur that changes the company's performance (change in management, key market trend, etc...). Value stocks do not need strong market growth trends like growth stocks.
2007-07-28 08:36:07 · answer #2 · answered by jakewk 2 · 0⤊ 0⤋
1
2016-12-24 08:09:46 · answer #3 · answered by Anonymous · 0⤊ 0⤋
The growth stocks are expecting well growth in nearby future. The value stocks are having good historical financial records. By the valuation methods, the value stock will be fundamentally strong. In growth stocks, this need not to be..
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2014-08-08 05:07:59 · answer #4 · answered by Rama 1 · 0⤊ 0⤋
Growth stocks are expected to get more valuable in the future because the business is growing. Think of a company that opens more stores each year.
A value stock is one that is expected to be more valuable in the future because it has a temporary problem that is interfering with it's earnings. Think of a home builder during a housing slump. When the slump is over, it will be worth a lot.
2007-07-28 05:53:23 · answer #5 · answered by Ted 7 · 1⤊ 0⤋
Growth stocks are companies that are expected to grow rapidly in the future. They sell at high PE ratios.
Value stocks are companies that are expected to grow less rapidly and sell at lower PEs.
Value stocks are alternately defined as stocks that are selling at discounts to their intrinsic value (ie a fair estimate of what the company is worth.) Value investors look for such companies. It is therefore possible for a stock to be both a growth and a value stock.
2007-07-28 20:54:50 · answer #6 · answered by Adam J 6 · 0⤊ 0⤋
Growth stock are speculating that the company will do well and prosper in the future. Value stocks pay out a dividend on past performance.
2007-07-28 05:52:44 · answer #7 · answered by niddlie diddle 6 · 0⤊ 0⤋
Growth are the stocks with hight P/E ratio - that means that investors pay more for the earnings company is making now, but expecting them to make more in the future. In other words they invest in to growth. Perfect examples are GOOG and AAPL.
Value are stocks which P/E ratio is low that means that you pay less for the companies earnings and has high assets to liabilities ratio.
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2007-07-28 05:57:49 · answer #8 · answered by Anonymous · 1⤊ 0⤋
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2016-01-17 16:15:38 · answer #9 · answered by Anonymous · 0⤊ 0⤋
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RE:
What is the difference between "growth" stocks and "value" stocks?
2015-08-24 04:30:41 · answer #10 · answered by Gwennie 1 · 0⤊ 0⤋