Difference Between Value Stocks and Growth Stocks (With Table)

Value stocks and Growth Stocks are stocks in companies that are undervalued and valued in comparison to their industry. However, when it comes to the difference between Value Stocks and Growth Stocks, most investors tend to focus on how Value Stocks and Growth Stocks will affect their portfolio.

Value Stocks vs Growth Stocks

The difference between Value Stocks and Growth Stocks is that Value Stocks are the more conservative and usually offer higher dividend yields, whereas, Growth stocks, on the other hand, tend to be riskier and provide bigger gains if they perform well, although Growth Stocks come with a higher degree of volatility.

Value stocks are stocks in companies that are undervalued in comparison to their industry. Value stock investing is typically seen as a passive investment. Value companies tend to offer lower-priced shares but also offer strong growth and dividend potential.

Growth stocks are a subset of the stock market. Moreover, they are often referred to as “overweight stocks,” and they generally have a higher growth rate than other types of stocks. Growth stocks can be both risky and profitable; however, it is riskier and provides bigger gains if they perform well.

Comparison Table Between Value Stocks and Growth Stocks

Parameters of ComparisonValue StocksGrowth Stocks
DefinitionValue stocks are the more conservative picks and usually offer higher dividend yields. Growth stocks are a subset of the stock market that generally have a higher growth rate because of increasing profits and revenues.
RiskValue stocks are usually not at high risk as they offer higher dividend yields. Growth stocks, tend to be riskier and provide bigger gains if they perform well.
ProfitValue Stocks are the more conservative and profitable but not immensely profitable.Growth stocks can be both risky and profitable, depending on the investor’s expectations for returns in the future.
VolatilityIt comes with a lower degree of volatility. It comes with a higher degree of volatility.
PricingIt is low-priced.It is high-priced.

What are Value Stocks?

Value stocks have grown rapidly due to the volatility of riskier investments being on the rise in late. Value stocks are stocks in companies that are undervalued in comparison to their industry. Typically Value Stocks are sold at a discount when compared to the market. Moreover, Value Stock investing is typically seen as a passive investment.

A Value Stock is an equity security that has traditionally been considered undervalued by its peers, and investment professionals can use this designation when selecting Value Stocks for their portfolios. Value companies tend to offer lower-priced shares but also offer strong growth and dividend potential. They are not the same thing as the companies that are “cheap” or “undervalued” in the financial markets but rather represent similar concepts in terms of price-based value.

Value stocks may be characterized by low price-to-book ratios, low P/E ratios, or high dividend yields. However, all three metrics can contribute towards the value label. Value stocks can be found in nearly any industry sector, although the most common range of sectors represented by Value Stocks includes consumer non-cyclical lumber, food, chemicals, industrial metals, telecom, and utilities.

What are Growth Stocks?

Growth stocks can be both risky and profitable, depending on the investor’s expectations for returns in the future, which is why investors must check multiple sources before choosing one Growth Stock investment. In some cases, Growth Stocks can have more volatility than all other types of individual securities because their fluctuating values correspond with more highly anticipated changes in production rates and more volatile industry trends.

Growth stocks are sometimes referred to as “intrepid stocks,” because they tend to perform well when there is investor uncertainty in the market. This means that Growth Stocks are typically good for investors who are willing to take on more risk to see better returns.

Growth Stocks are a subset of the stock market. They are often referred to as “overweight stocks,” and they generally have a higher growth rate than other types of stocks. Investors use these types of stocks to increase their capital gains on the investments that they make for an extended period.

Growth stocks are associated with companies that are in the early stage of their life cycle. These companies could be expanding internationally, introducing new products, or undergoing acquisition by other firms.

Main Differences Between Value Stocks and Growth Stocks

  1. Value stocks are the more conservative picks and usually offer higher dividend yields, whereas, Growth stocks are a subset of the stock market that generally have a higher growth rate because of increasing profits and revenues.
  2. Value stocks are usually not at high risk as they offer higher dividend yields, whereas, Growth stocks tend to be riskier and provide bigger gains if they perform well.
  3. Value Stocks are the more conservative and profitable but not immensely profitable, whereas, Growth stocks can be both risky and profitable, depending on the investor’s expectations for returns in the future.
  4. Value Stocks often come with a lower degree of volatility, whereas, Growth stocks come with a higher degree of volatility.
  5. Value Stocks are low-priced, whereas, Growth stocks are high-priced.

Conclusion

The market has different expectations for Value Stocks and Growth Stocks depending on how well established they are in the industry. Some analysts in the market have very high expectations for Growth Stocks because these stocks may have a higher potential to grow quickly. However, some analysts have lower expectations for Value Stocks that are well-established within the industry because they believe that it may be harder for these firms to increase their revenues at a rapid pace moving forward.

Value Stock investing is typically seen as a passive investment, whereas, Growth Stocks are typically seen as a long-term investment. However, when researching and making an investment, it is best to make sure the company has healthy debt levels and is stable financially.

References

  1. https://link.springer.com/article/10.1057/palgrave.jam.2240070
  2. https://www.tandfonline.com/doi/abs/10.2469/faj.v54.n2.2168
  3. https://www.tandfonline.com/doi/pdf/10.2469/faj.v49.n1.27
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