When P/E Ratio is Dominant Factor
If the dominant factor is the change in P/E ratio then it means there has been a significant change in investor perceptions of future profitability for the company even though recent past financial performance has not reflected the change in perceptions. P/E ratio increase (multiple expansion) = higher expectations of future profits (typically at a higher margin than before)P/E ratio decrease (multiple contraction) = lower expectation of future profits (typically at a lower margin than before)
When EPS is Dominant Factor
If the dominant factor is the change in EPS then it means the company has performed better or worse than expected leading to corresponding share price corrections; however, the company's expected margin of profitability in the future has not necessarily changed significantly so there may not be a significant accompanying change in the P/E ratio expectations.