Which ratio is used to determine the value of a stock based on earnings?

Gross margin represents the difference between revenue and cost of goods sold, expressed as a percentage of revenue. While it indicates the efficiency of production and pricing strategy, it does not directly relate to stock valuation based on earnings. Gross margin is more focused on operational profitability rather than the market's perception of a company's earnings potential.

The times interest earned ratio measures a company's ability to meet its debt obligations based on its earnings before interest and taxes. Although it is an important measure of financial health and creditworthiness, it does not provide insights into stock valuation based on earnings, as it specifically relates to debt management rather than equity valuation.

Net margin is the percentage of revenue remaining after all expenses, taxes, and costs have been deducted. While net margin offers insights into overall profitability, it is not the primary metric used for determining stock value in relation to earnings. Investors typically rely on the P/E ratio for a more direct assessment of stock valuation.