Simultaneous Effect of Financial Performance Indicators

Oct 13, 2025 by vinooalluri.com 149 views

Analysis of the Effect of Financial Performance on Property Company Stock Prices and Real Estate in Indonesia

Introduction

The Indonesian stock market has experienced significant growth in recent years, with the property and real estate sector being one of the most attractive investment options. However, with the increasing number of companies listed on the Indonesia Stock Exchange (IDX), investors are faced with a daunting task of selecting the right stocks to invest in. One of the key factors that investors consider when making investment decisions is the financial performance of the company. In this study, we aim to analyze the effect of four key financial performance indicators, namely Net Profit Margin (NPM), Return on Assets (ROA), Debt to Equity Ratio (DER), and Earnings Per Share (EPS), on the stock prices of property and real estate companies listed on the IDX for the 2013-2016 period.

Methodology

This study employed a quantitative approach, using a sample of 32 property and real estate companies listed on the IDX. The population consisted of 46 registered companies, and the sample was selected using the Purposive Sampling method. The data was collected from the companies' annual reports and financial statements, and the analysis was conducted using SPSS statistics software. The study focused on the 2013-2016 period, which was chosen due to the significant growth of the property and real estate sector during this time.

Results

The results of this study indicate that:

Net Profit Margin (NPM)

The Net Profit Margin (NPM) has a positive and significant effect on stock prices. This means that companies with a higher NPM tend to have higher stock prices. A good NPM indicates that the company is able to manage costs and generate greater profits, which in turn will attract investors. This is because investors tend to see companies with high NPM as more attractive investment options, as they are able to generate greater profits from their sales.

Example of a company with a high NPM:

Company X has a NPM of 20%, which is higher than the industry average of 15%. This means that for every dollar of sales, Company X is able to generate 20 cents of profit. This high NPM will attract investors, as they see the company as a profitable investment option.

Return on Assets (ROA)

The Return on Assets (ROA) also has a positive and significant influence on stock prices. High ROA shows efficiency in the use of assets to generate profits, so investors tend to see the company as an attractive investment. This is because investors tend to see companies with high ROA as more efficient in their use of assets, which will lead to greater profits.

Example of a company with a high ROA:

Company Y has a ROA of 25%, which is higher than the industry average of 20%. This means that for every dollar of assets, Company Y is able to generate 25 cents of profit. This high ROA will attract investors, as they see the company as a more efficient investment option.

Debt to Equity Ratio (DER)

On the other hand, the Debt to Equity Ratio (DER) has a negative and insignificant effect on stock prices. This means that companies with a high proportion of debt compared to their own capital tend to be unattractive in the eyes of investors. Excess debt can be a risk that reduces investor confidence in the company's financial health.

Example of a company with a high DER:

Company Z has a DER of 2:1, which is higher than the industry average of 1:1. This means that for every dollar of debt, Company Z has only 50 cents of equity. This high DER will deter investors, as they see the company as a riskier investment option.

Earnings Per Share (EPS)

The Earnings Per Share (EPS) has a positive and significant influence on stock prices. Increased EPS is often an indication of good profit growth, thereby increasing the attractiveness of shares in the market.

Example of a company with a high EPS:

Company W has an EPS of $1.50, which is higher than the industry average of $1.00. This means that for every share of Company W, investors can expect to earn $1.50 in profits. This high EPS will attract investors, as they see the company as a profitable investment option.

Simultaneous Effect of Financial Performance Indicators

Simultaneously, all of these variables - net profit margin, return on assets, debt to equity ratio, and earnings per share - have a significant influence on company stock prices. This shows that overall financial performance plays an important role in determining the market value of the company's shares in the property and real estate sectors.

Conclusion

From the results of the analysis, it can be concluded that good financial performance can contribute to the increase in the stock prices of property companies and real estate listed on the Indonesia Stock Exchange. Investors should pay attention to these indicators when doing analysis before investing. Understanding the relationship between financial performance and stock prices will help in making better and strategic investment decisions. In a competitive market context, companies need to continue to improve their financial performance to attract investors' attention and increase the value of shares in the future.

Recommendations

Based on the findings of this study, the following recommendations are made:

Investors should pay attention to the financial performance indicators of property and real estate companies listed on the IDX.
Companies should focus on improving their financial performance by increasing their NPM, ROA, and EPS, while reducing their DER.
The IDX should consider incorporating financial performance indicators into their stock selection criteria to provide investors with a more comprehensive view of a company's financial health.

Limitations

This study has several limitations that should be noted:

The study only focused on property and real estate companies listed on the IDX, and may not be generalizable to other industries.
The study only analyzed the 2013-2016 period, and may not reflect the current market conditions.
The study only used a sample of 32 companies, and may not be representative of the entire population of property and real estate companies listed on the IDX.

Future Research Directions

Future research should aim to:

Expand the study to include other industries and companies listed on the IDX.
Analyze the current market conditions and how they affect the financial performance of property and real estate companies.
Use more advanced statistical techniques to analyze the relationship between financial performance indicators and stock prices.

By understanding the relationship between financial performance indicators and stock prices, investors and companies can make better and more informed investment decisions, leading to a more efficient and effective market.
Q&A: Understanding the Effect of Financial Performance on Property Company Stock Prices and Real Estate in Indonesia

Introduction

In our previous article, we analyzed the effect of four key financial performance indicators, namely Net Profit Margin (NPM), Return on Assets (ROA), Debt to Equity Ratio (DER), and Earnings Per Share (EPS), on the stock prices of property and real estate companies listed on the Indonesia Stock Exchange (IDX) for the 2013-2016 period. In this article, we will answer some of the most frequently asked questions (FAQs) related to this topic.

Q: What is the significance of Net Profit Margin (NPM) in determining stock prices?

A: Net Profit Margin (NPM) is a key financial performance indicator that measures a company's ability to generate profits from its sales. A high NPM indicates that a company is able to manage costs and generate greater profits, which in turn will attract investors. This is because investors tend to see companies with high NPM as more attractive investment options, as they are able to generate greater profits from their sales.

Q: How does Return on Assets (ROA) affect stock prices?

A: Return on Assets (ROA) is another key financial performance indicator that measures a company's efficiency in using its assets to generate profits. A high ROA shows that a company is able to generate greater profits from its assets, which will attract investors. This is because investors tend to see companies with high ROA as more efficient in their use of assets, which will lead to greater profits.

Q: What is the impact of Debt to Equity Ratio (DER) on stock prices?

A: Debt to Equity Ratio (DER) is a key financial performance indicator that measures a company's level of debt compared to its equity. A high DER indicates that a company has a high level of debt, which can be a risk that reduces investor confidence in the company's financial health. This is because investors tend to see companies with high DER as riskier investment options, as they may not be able to pay off their debts.

Q: How does Earnings Per Share (EPS) affect stock prices?

A: Earnings Per Share (EPS) is a key financial performance indicator that measures a company's ability to generate profits per share. A high EPS indicates that a company is able to generate greater profits from its shares, which will attract investors. This is because investors tend to see companies with high EPS as more profitable investment options, as they are able to generate greater profits from their shares.

Q: What is the significance of financial performance indicators in determining stock prices?

A: Financial performance indicators, such as NPM, ROA, DER, and EPS, play a crucial role in determining stock prices. These indicators provide investors with a comprehensive view of a company's financial health, which will help them make better and more informed investment decisions.

Q: How can investors use financial performance indicators to make better investment decisions?

A: Investors can use financial performance indicators to make better investment decisions by analyzing a company's financial performance and comparing it to its industry peers. This will help them identify companies with strong financial performance, which are more likely to generate greater profits and attract investors.

Q: What are some of the limitations of this study?

A: This study has several limitations that should be noted. The study only focused on property and real estate companies listed on the IDX, and may not be generalizable to other industries. The study only analyzed the 2013-2016 period, and may not reflect the current market conditions. The study only used a sample of 32 companies, and may not be representative of the entire population of property and real estate companies listed on the IDX.

Q: What are some of the future research directions for this study?

A: Future research should aim to expand the study to include other industries and companies listed on the IDX. Future research should also analyze the current market conditions and how they affect the financial performance of property and real estate companies. Additionally, future research should use more advanced statistical techniques to analyze the relationship between financial performance indicators and stock prices.

Conclusion

In conclusion, financial performance indicators, such as NPM, ROA, DER, and EPS, play a crucial role in determining stock prices. By understanding the relationship between these indicators and stock prices, investors and companies can make better and more informed investment decisions, leading to a more efficient and effective market.