Now as you're attempting to determine if you're a buyer or not - Cramer said apply this simple rule.
"A stock can trade up to a multiple that's as high as twice the long-term growth rate before it gets too expensive for me," he said.
That means if a company is growing its earnings per share at a 20% clip, its stock could potentially trade as high as 40 times earnings and Cramer would still be a buyer.
However, if you hold a growth stock, Cramer says it's important to do constant homework.
"You need to watch, like a hawk, the direction the earnings estimates are going," he said, "and whether those estimates are increasing at a faster or slower pace."
As long as they're increasing at a faster rate, the market will pay the premium for the growth.
But - when they start to slow, the Street will turn it's back.
"When that happens and it always happens - that is, when growth begins to decelerate, then the stock could go SPLAT! It's like driving a fast car right into a brick wall."
In other words, the moment a growth company stumbles the stock can fall faster than you could imagine.
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Chipotle may be a good example, a darling of growth investors, it dropped more than a hundred points, losing a quarter of its value in a matter of days, when, in July of 2012, it reported a disappointing quarter that suggested the company might be more vulnerable to economic weakness than previously thought.
Despite the risk, Cramer thinks growth stocks are worth the reward. Often times when the market swoons, growth stocks will perform relatively well, because investors are still winning to pay up for growth.
"I feel strongly that to build a portfolio that can work in every kind of market, you need a growth stock in the mix," Cramer said.
Call Cramer: 1-800-743-CNBC
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