Growth stocks are those that are showing high visibility in terms of growth in sales, earnings and in the operating margins. It is this combination that actually makes a growth stock. Normally, growth stocks tend to give tremendous stock market outperformance during the growth phase. Bharti Airtel between 2002 and 2007 is a case in point. Similarly, Eicher Motors has delivered stellar growth in top-line, profits and margins consistently for the last 32 quarters. That is perhaps the reason why the stock has moved up from Rs.200/ share in 2009 to Rs.30,000/- per share in 2017. Normally, growth stocks tend to quote at rich and expensive P/E ratios in the market. However, such growth stocks should be judged based on their PEG ratio and not purely on their P/E ratio.

The concept of growth stocks is closely related to growth based investing strategy. You bet on companies that are either disruptive or are likely to achieve a higher plane of growth and that is what makes them attractive in such cases. Also, these growth companies are normally not the typical commodity types but they are specific sector-agnostic businesses. If you look at the last 20 years, there are stocks like Eicher, Havells, Ajanta Pharma and IndusInd Bank that have been high growth stocks.