In growth investing, an investor may take the view that even a relatively high current valuation (such as PER) can be justified — or exceeded — by the company's future earnings growth.
The underlying idea
It's common to focus on factors such as the growth rate of revenue and earnings, the potential size of the market, and a company's competitive strengths when considering candidates. Stocks with high growth expectations tend to trade at higher PER levels.
Benefits and points to keep in mind
If the expected growth materializes, it can lead to significant share-price gains, but if growth expectations fade, the resulting price decline can also be substantial. Compared with other investment styles such as value investing, neither approach is inherently superior — each has its own characteristics and points to keep in mind.