The whole point of running a business is earning money, so it wouldn’t be a stretch to say that earning is one of the key metrics in measuring a company’s success. With more net income, said companies can increase their value by investing in themselves, expanding their services and product ranges, improving equipment, and innovating in their respective fields. On the flip side, they can also distribute their earnings to shareholders through dividends. This creates shareholder value, making the company more attractive to investors.
However, frequent readers know I don’t analyze stocks using only one metric. Sure, a company's current stock price is one valuation metric. However, when we combine a stock price with earnings, we get the P/E: the ratio between the stock’s price and the company’s earnings per share.
