i need a little clarification. high growth refers to the growth rate of the stock's earnings.
a high growth company usually has a high P/E ratio. Their earnings will be low relative to their price, and the earnings (as dictated by growth rate) will grow and outpace the price. i dont understand the logic of this, how do they determine the right price at which the earnings will outpace the price?
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In essence you are paying a premium for future earnings that are growing at a high rate, also should look at the PEG ratio.
is that the only reason, that the price is determined by synergistic premiums and control premiums?
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