Definition of P/E

PE ratio, P/E ratio or PER for short.  A company's share price divided by its earnings per share (EPS), expressed as a number or as a multiple of EPS (P/E multiple). The earnings used for the calculation can be either the amount most recently reported by the company, or an analyst's projection of future earnings (normally the current year or the year after that). An important indication of comparative value - investors are normally better off buying a stock with a low P/E ratio than one with a high ratio, as they are getting more earnings for their money. [1]

A company's share price divided by the amount of profits it makes for each share in a 12-month period. PE ratios are normally calculated on the base of all the profit made in the period, whether or not the profit is paid out to shareholders in that period. [2]

FT Articles & Analysis