EPS is a commonly used measure of a company’s profitability, and it is used in the calculation of other popular valuation metrics like the price-to-earnings (P/E) ratio. To calculate earnings ...

P/E = Share Price / Earnings per Share Alternatively ... One analyst might take a high ratio (along with other relevant data) to mean that a company is overvalued, while another might interpret ...

Now, if another company in the same industry also has a share price of $50 but an EPS of $20, its P/E ratio would be 2.5, meaning it would cost $2.50 to purchase $1 of that company's earnings.