Investors use the PE Ratio to gauge market expectations of a company and see how relatively expensive companies are compared to their peers.

PE Ratio = Current Price / Earnings Per Share

PE ratios are one of the most common ways to gauge market expectations.  Higher PE Ratios are common among high-growth companies as investors are willing to pay a premium now to own a part of that company's future earnings.

Lower PE Ratios are more common stable, sustainable companies growing slower, which have more of a value appeal.  Turbulent companies with limited growth or poor investor sentiment tend toward low PE Ratios.