A price-earnings ratio (P/E ratio) is even computed to help quantify this relationship. The P/E ratio is the current
price of the stock divided by the latest EPS figure. It enables investors to anticipate movements in the price of a
stock based on their projections of earnings per share. If a company’s P/E ratio is twenty and is expected to remain
constant, then an increase in EPS of $1 should lead to a $20 rise in stock price.
As of July 8, 2009, the P/E ratio for Several Prominent Companies
The ongoing debate as to whether EPS and the P/E ratio are over emphasized as investing tools is a controversy
better left to upper-level finance courses. The fascination is certainly real regardless of whether the perceived
benefits are as great as many believe.