Growth stocks are characterized by what expectation regarding future earnings?

Growth stocks are characterized by what expectation regarding future earnings?

• A. Stable earnings
• B. Higher future earnings
• C. Consistent dividends
• D. Low market volatility

Answer: (B)

Growth stocks are recognized for the expectation of higher future earnings. This means that investors purchasing growth stocks anticipate significant increases in a company's earnings over time, often driven by innovations, expanding markets, or increased consumer demand. The outlook for these stocks is usually optimistic, as they are part of companies that are expected to outperform the market in terms of earnings growth, even if they do not currently pay dividends. While stable earnings might be a characteristic of certain value stocks, growth stocks typically do not prioritize consistent dividends or market stability; instead, they reinvest profits back into the business to fuel further growth. Hence, the primary appeal of growth stocks lies in their ability to deliver substantial returns through an increase in earnings rather than through dividends or low volatility.

Growth stocks are recognized for the expectation of higher future earnings. This means that investors purchasing growth stocks anticipate significant increases in a company's earnings over time, often driven by innovations, expanding markets, or increased consumer demand. The outlook for these stocks is usually optimistic, as they are part of companies that are expected to outperform the market in terms of earnings growth, even if they do not currently pay dividends.

While stable earnings might be a characteristic of certain value stocks, growth stocks typically do not prioritize consistent dividends or market stability; instead, they reinvest profits back into the business to fuel further growth. Hence, the primary appeal of growth stocks lies in their ability to deliver substantial returns through an increase in earnings rather than through dividends or low volatility.