Impact of Earnings Per Share on Stock Prices and Price to Earnings Ratio

In this paper, the researchers have made an attempt to examine the impact of Earnings Per Share on the stock prices and Price to Earnings Ratio. In the study, the researchers have taken into consideration sixteen companies which represent four different industries such as Banking, Pharmaceutical, Information Technology and Cement and Cement Products industry. A reference period of eight years has been taken from 2011-2012 to 2018-2019. In order to achieve the objectives of the study, regression analysis and correlation have been employed and the findings put forth by the study affirmed that on the one hand there exists a positive relationship between Earnings per share and market price of shares and on the other hand earnings per share does not statistically, in a significant way, influence price-to-earnings ratio as the relationship between the two variables is statistically quite low. Thus, on the basis of these findings, it can be concluded that earnings per share influences one variable namely market price of stocks but does fail to influence significantly price-to-earnings ratio.