Improving asset utilization

Oct 13, 2025 by talynt.org 50 views

Analysis of Increasing the Value of Price Earning Ratio in Manufacturing Companies Listed on the Indonesia Stock Exchange (2013-2017)

Introduction

The Price Earning Ratio (PER) is a crucial indicator in the investment world, particularly in the stock sector. It measures the relationship between a company's stock price and its earnings per share. A higher PER indicates that investors are willing to pay more for each unit of profit generated by the company. In this study, we aim to explore the influence of several financial variables on the PER of manufacturing companies listed on the Indonesia Stock Exchange (IDX) from 2013 to 2017.

Research Methodology

To achieve our research objectives, we employed a descriptive statistical analysis and partial Least Square (SEM-PLS) analysis. The Smart PLS 3.0 program was used to facilitate the analysis process, while the hypothesis was tested using the path coefficient value and significance testing. This approach provides a clearer understanding of how these variables interact and contribute to the increase in PER.

Research Result

Our results showed that there was a significant positive influence of Return on Asset (ROA), Debt Equity Ratio (DER), and Dividend Payout Ratio (DPR) on PER. This indicates that an increase in these three variables can encourage an increase in PER, which shows that investors are more willing to pay more for each profit unit generated by the company. Conversely, Return on Equity (ROE), Current Ratio (CR), and Price Book Value (PBV) variables do not show significant effects on PER. This suggests that although these variables are important in financial analysis, they are not always the main determinant in determining the value of shares based on PER.

Analysis and Implications

Further analysis revealed that ROA is an indicator of efficiency in the use of assets that is very relevant for investors. Companies with high ROAs show that they can generate greater profits with assets owned, thereby increasing the appeal of these shares. In addition, the optimal DER shows effective use of debt to increase profitability, which in turn attracts investors.

The DPR also has an important role in attracting investors. Companies that consistently distribute dividends tend to be more valued by investors, because this reflects the stability and commitment of the company to provide returns to shareholders.

On the other hand, ROE, CR, and PBV's images in influencing PER may be caused by market fluctuations that are influenced by external factors such as economic and political conditions. Investors may prioritize variables that show direct performance and yield, compared to more qualitative ratios.

Conclusion

This study confirms the importance of ROA, DER, and DPR as the main factor that influences PER in manufacturing companies in Indonesia. By understanding the effect of these variables, investors and company management can make more informed decisions in the company's investment and management strategy. Therefore, it is essential for companies to focus on improving financial performance that can support the growth of stock value in the market.

Recommendations

Based on our findings, we recommend that companies in the manufacturing sector in Indonesia focus on improving their ROA, DER, and DPR. This can be achieved by:

Improving asset utilization: Companies should strive to optimize their asset utilization to increase their ROA.
Optimizing debt management: Companies should aim to maintain an optimal DER to increase their profitability.
Consistently distributing dividends: Companies should consistently distribute dividends to attract investors and demonstrate their commitment to providing returns to shareholders.

By implementing these recommendations, companies can increase their PER and attract more investors, ultimately leading to the growth of their stock value in the market.

Limitations

This study has several limitations that should be acknowledged. Firstly, the study only focused on manufacturing companies listed on the IDX from 2013 to 2017. Secondly, the study only examined the influence of six financial variables on PER. Finally, the study did not control for external factors that may influence PER.

Future Research Directions

Future research should aim to:

Examine the influence of other financial variables: Future studies should examine the influence of other financial variables on PER, such as cash flow per share and earnings per share growth rate.
Control for external factors: Future studies should control for external factors that may influence PER, such as economic and political conditions.
Examine the influence of non-financial variables: Future studies should examine the influence of non-financial variables on PER, such as corporate governance and social responsibility.

By addressing these limitations and expanding the scope of the study, future research can provide a more comprehensive understanding of the factors that influence PER in manufacturing companies in Indonesia.
Frequently Asked Questions (FAQs) about the Analysis of Increasing the Value of Price Earning Ratio in Manufacturing Companies Listed on the Indonesia Stock Exchange (2013-2017)

Q: What is the Price Earning Ratio (PER) and why is it important?

A: The PER is a financial ratio that measures the relationship between a company's stock price and its earnings per share. It is an important indicator in the investment world, as it helps investors determine the value of a company's shares.

Q: What are the financial variables that influence the PER?

A: The study found that Return on Asset (ROA), Debt Equity Ratio (DER), and Dividend Payout Ratio (DPR) have a significant positive influence on PER. These variables are important indicators of a company's financial performance and are used by investors to evaluate the value of a company's shares.

Q: What is the significance of ROA in influencing PER?

A: ROA is an indicator of efficiency in the use of assets that is very relevant for investors. Companies with high ROAs show that they can generate greater profits with assets owned, thereby increasing the appeal of these shares.

Q: How does DER influence PER?

A: The optimal DER shows effective use of debt to increase profitability, which in turn attracts investors. Companies with a high DER may be seen as more attractive to investors, as they are able to generate greater profits with debt.

Q: What is the role of DPR in influencing PER?

A: The DPR also has an important role in attracting investors. Companies that consistently distribute dividends tend to be more valued by investors, because this reflects the stability and commitment of the company to provide returns to shareholders.

Q: Why do ROE, CR, and PBV not have a significant influence on PER?

A: ROE, CR, and PBV's images in influencing PER may be caused by market fluctuations that are influenced by external factors such as economic and political conditions. Investors may prioritize variables that show direct performance and yield, compared to more qualitative ratios.

Q: What are the implications of this study for investors and company management?

A: This study confirms the importance of ROA, DER, and DPR as the main factor that influences PER in manufacturing companies in Indonesia. By understanding the effect of these variables, investors and company management can make more informed decisions in the company's investment and management strategy.

Q: What are the recommendations for companies in the manufacturing sector in Indonesia?

A: Based on our findings, we recommend that companies in the manufacturing sector in Indonesia focus on improving their ROA, DER, and DPR. This can be achieved by:

Improving asset utilization: Companies should strive to optimize their asset utilization to increase their ROA.
Optimizing debt management: Companies should aim to maintain an optimal DER to increase their profitability.
Consistently distributing dividends: Companies should consistently distribute dividends to attract investors and demonstrate their commitment to providing returns to shareholders.

Q: What are the limitations of this study?

A: This study has several limitations that should be acknowledged. Firstly, the study only focused on manufacturing companies listed on the IDX from 2013 to 2017. Secondly, the study only examined the influence of six financial variables on PER. Finally, the study did not control for external factors that may influence PER.

Q: What are the future research directions?

A: Future research should aim to:

Examine the influence of other financial variables: Future studies should examine the influence of other financial variables on PER, such as cash flow per share and earnings per share growth rate.
Control for external factors: Future studies should control for external factors that may influence PER, such as economic and political conditions.
Examine the influence of non-financial variables: Future studies should examine the influence of non-financial variables on PER, such as corporate governance and social responsibility.