price/earnings ratio

Definitions

Accounting

Economics

  • noun the ratio between the market price of a share and the earnings per share calculated by dividing the market price by the earnings per share. The P/E ratio is an indication of the way investors think a company will perform in the future, as a high market price suggests that investors expect earnings to grow and this gives a high P/E figure; a low P/E figure implies that investors feel that earnings are not likely to rise.
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