Is an abbreviation for Price / Earnings, which shows the relationship between a company's market value and annual profit (earnings)
One thus divides these two factors with each other and gets a number. This number has historically helped to give an indication of whether a company is cheap or expensive. Historically, the following are:
0-13 - Assumed that the company and the share are low priced, or that a decrease in income is expected.
14-20 - Has historically proved to be a reasonable pricing of a company.
21-28 - Here a stock starts to be called overpriced. In many cases, however, it may be that the company experiences large growth in income or that investors expect a large increase in income, which has not yet been shown since the last result was published.
28+ Now the company and the stock are starting to get very high P / E, either the company is in what we popularly call a bubble pricing, or the company is priced after a promising future with strong earnings.
Link to historical P/E ratios can be found here: