Related to Equities: Ratio derived by dividing the current stock price by an earnings figure. The price can be divided by the current fiscal year earnings estimate or the trailing 12 months actual earnings. Although P/Es are subject to wide fluctuations over time due to price as well as earnings, a low P/E is typically more favourable than a high P/E.

Related to Mutual Funds: A ratio that measures how much investors are paying for a potential stream of future earnings. The price/earnings ratio of an individual company is calculated by dividing the current market price of the company's common stock by the company's earnings per common share. A fund's price/earnings ratio is calculated by averaging the price/earnings ratios of all companies whose securities are held in the fund's portfolio.