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Price Earnings Ratio
The P/E ratio is a measure of historic (the previous financial year) earnings against the current share price. If the P/E is high, this means that the market perceives a big increase in future earnings per share.  In other words, the perception is that this is a fast growing company.  Higher earnings may also equate to big increases in dividends and rapid expansion.  On the other hand, if the P/E is low, then there is a perception that either earnings per share are decreasing or that future growth in earnings is negligible.  In other words, low P/E equates to a perception of low future growth and therefore low prospects for future payout increases - possibly even decreases. The market is (rightly) usually willing to pay a premium for fast growing companies.