Because a multiple for earnings per share gives you a rough idea of a fair share price. If earnings per share is $1, and the Share price is $5, that's fantastic

Because a multiple for earnings per share gives you a rough idea of a fair share price. If earnings per share is $1, and the Share price is $5, that's fantastic. If the share price is $50, not good. You can track that multiple over time to know when to buy or sell a stock. Of course that's only a superficial analysis. You have to take into account the book value (asset value). If the company is high growth. What industry it's in. Whether a change in earning per share is due to a one-time event. Etc.