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First thing to consider is judge the P/E ratio within the companies industry for comparison.

Next the P/E ratio is a way to judge if the companies stock price is high, based on it's competitor's.

Earning, in it self, isn't used to evaluate one company with another. As each company has it's own financial basis. So 1 company having earnings of $2.00, doesn't make it a better or stronger company then 1 with $1.00 earnings.

Earning value is used mainly for dividends paid to shareholders, when evaluating company fundamentals. Will you get a strong ROI if you own stock. Increasing or stable earnings indicates increasing or stable dividend paid.

P/E ratio is use to evaluate if the companies stock is expensive or cheap. Will you get a deal if you own the stock. Is there growth potential or is the price high for the industry.

Basically if you want to invest for dividends you evaluate earnings. If you want to invest in price growth you evaluate P/E ratio.




http://www.investopedia.com/terms/e/earnings.asp
http://www.investopedia.com/terms/p/price-earningsratio.asp