The P/E ratio measures the relationship between a company's stock price and its earnings per issued share. The P/E ratio is calculated by dividing a company's current stock price by its earnings per share (EPS).The P/E ratio helps investors determine the market value of a stock as compared to the company's earning

The P/E ratio is calculated by dividing the market value price per share by the company's earnings per share. Earnings per share (EPS) is the amount of a company's profit allocated to each outstanding share of a company's common stock, serving as an indicator of the company's financial health.

The first calculation is multiplying the stock's P-E ratio at the buy point by 2.3 (130%). That gives you an expanded P-E ratio. Next, take the next year's consensus annual earnings estimate and multiply by the expanded P-E ratio. That gives a projected price target.Earning per share (EPS) is the amount of a company's profit allocated to each outstanding share of a company's common stock, serving as an indicator of the company's financial health.In other words, earning per share is the portion of a company's net income that would be earned per share if all the profit were paid out to its shareholders.EPS is is used typically by analysts and traders to establish the financial strength of a company.

Earnings per share is used in conjunction with other financial data to determine a company's stock price. For example, the price to earnings ratio uses EPS to determine the market value of a stock.The earning per share estimate times that adjusted multiple will equal stock target price.For example: if a company is estimated earn 2 per share and you estimate its earning multiple at 20, then your stock target price is 40 per share.