Many growth stocks have great sales and earnings growth, but also very high P/E ratios. Isn their growth priced in?
Answered by Michael Cintolo, Editor of Cabot Market Letter and Cabot Top Ten Trader: For growth stocks, P/E ratios are simply not an important factor in determining future performance. Rapid growth and (most important) a revolutionary product or service are better predictors. Eventually, valuation will matter, but you should let the stock tell you when it does—its own topping action will let you know it’s time to move on. Just remember that a valuation is the result of good performance, not the cause of it.
