The Effect of Free Cash Flow to Equity, Price/Earning Ratio and Profitability on Stock Prices of the Financial Sector Listed on The Idx Period 2022-2025

Alifia Salsabila; Ati Sumiati; Dwi Kismayanti Respati

doi:10.56442/rttm.v3i4.106

Authors

Alifia Salsabila Universitas Negeri Jakarta
Ati Sumiati Universitas Negeri Jakarta,
Dwi Kismayanti Respati Universitas Negeri Jakarta

DOI:

https://doi.org/10.56442/rttm.v3i4.106

Keywords:

Financial Analysis, Financial Ratios, Financial Performance

Abstract

This study aims to examine the effect of free cash flow to equity, price/earnings ratio, and profitability on stock prices in the financial sector listed on the Indonesia Stock Exchange (IDX) during the 2022-2025 period. The research method used is a quantitative method with secondary data in the form of financial reports obtained from the Indonesia Stock Exchange website. The research sample consisted of 35 financial companies selected using a purposive sampling technique. Data analysis techniques used were classical assumption testing, descriptive statistical analysis, multiple linear regression testing, and partial and simultaneous hypothesis testing. The results show that partially, free cash flow to equity and price/earnings ratio have no effect on stock prices, while profitability is proven to influence stock prices. Meanwhile, price/earnings ratio and profitability are proven to influence stock prices simultaneously. The contribution of free cash flow to equity, price/earnings ratio, and profitability variables in influencing stock prices is 24%.

References

Azis, M., Mintarti, S., & Nadir, M. (2015). Manajemen Investasi. Yogyakarta: Deepublish.

Block, S. B., & Hirt, G. A. (2009). Foundation of Financial Management (8th ed.). New York: McGraw Hill.

Bodie, Z., Kane, A., & Marcus, A. J. (2005). Investments. New York: McGraw Hill.

Damodaran, A. (1997). Corporate Finance. New York: John Wiley and Sons.

Damodaran, A. (2012). Investment Valuation : Tools and Techniques for Determining the Value of Any Asset (3rd ed.). New Jersey: John Wiley and Sons.

Djaja, I. (2017). All About Corporate Valuation. Jakarta: Elex Media Komputindo.

Graham, B. (1973). The Intelligent Investor: The Definitive Book on Value Investing. New York: HarperCollins.

Hartini, E. F., & Rosadi, K. H. (2019). Pengaruh Kinerja Keuangan Terhadap Harga Saham Perusahaan Food and Beverages Yang Terdaftar Di Bursa Efek Indonesia. Jurnal Manajemen Kewirausahaan, 15(2), 131. https://doi.org/10.33370/jmk.v15i2.222

Hartono, J. (2017). Teori portofolio dan analisis investasi. Yogyakarta: BPFE-Yogyakarta.

Hidayat, D. (2023). Pengaruh Dividend Per Share, Earnings Per Share dan Price Earnings Ratio Terhadap Harga Saham (Kasus pada PT Bank Negara Indonesia (Persero) Tbk). Jurnal Perbankan Dan Keuangan, 4(1), 1–10. http://jurnal.unsil.ac.id/index.php/banku

International Monetary Fund. (2024). Indonesia: Financial Sector Assessment Program - Financial System Stability Assessment. IMF Staff Country Reports, 272, 63. https://doi.org/10.5089/9781513522111.002

Jakataofik, I., S. Paranita, E., & Ispriyahadi, H. (2023). The Effect Of Company Financial Performance On Stock Prices With Dividend Payout Ratio As Intervening Variables In Food And Beverage Sector Companies. International Journal of Science, Technology & Management, 4(2), 474–491. https://doi.org/10.46729/ijstm.v4i2.792

Jones, C. P. (2004). Investments : Analysis and Management (9th ed.). New Jersey: John Wiley and Sons.

Kam, H. K., & Shin, Y. J. (2019). An Empirical Study on the Relationship between Price-Earnings Ratios and Stock Values. Journal of Industrial Economics and Business, 32(2), 725–743. https://doi.org/10.22558/jieb.2019.04.32.2.725

Kemenkeu. (2023). Wamenkeu Sampaikan Empat Peluang Masa Depan Sektor Keuangan, Apa Saja? https://www.kemenkeu.go.id/informasi-publik/publikasi/berita-utama/Wamenkeu-Sampaikan-Empat-Peluang-Sektor-Keuangan

Kennedy, P. S. J., & Sinaga, M. K. (2022). The Influence of The Intrinsic Value of Stocks on Its Market Price. In Journal IMAGE | (Vol. 11, Issue 2).

Keown, A. J., Martin, J. D., Petty, J. W., & Scott, D. F. (2005). Financials Management Principles and Applications (10th ed.). New Jersey: Prentice-Hall.

Kumar, R. (2017). Perspectives on strategic finance. Strategic Financial Management Casebook, 1–29. https://doi.org/10.1016/b978-0-12-805475-8.00001-x

Kusumanisita, A. I., & Minanti, F. H. (2021). Stock Valuation Analysis Of Dividend Discount Model , Free Cash Flow To Equity And Walter Model In Investment Decision. 5(1), 78–95. https://doi.org/10.22236/agregat

Lim, M. A. (2016). The Handbook of Technical Analysis. Singapore: Wiley.

Loya, E. S., & Rahmawati, C. H. T. (2022). The Influence Of Liquidity And Profitability On Stock Prices Of Food And Beverage Companies Listed In Indonesia Stock Exchange. Jurnal Ilmiah Manajemen Dan Bisnis, 8(2), 203. https://doi.org/10.22441/jimb.v8i2.14822

Lubis, P. K. D., & Adriani, D. (2021). The Effect of Profitability on Share Prices Through Capital Structure as an Intervening Variable in Indonesia’s Automotive Sectors Listed Companies. Proceedings of the International Conference on Strategic Issues of Economics, Business and, Education (ICoSIEBE 2020), 163(ICoSIEBE 2020), 140–144. https://doi.org/10.2991/aebmr.k.210220.025

Melani, A. (2024). IHSG Tersungkur 2,36% pada 10-14 Juni 2024, Ada Apa? https://www.liputan6.com/saham/read/5620460/ihsg-tersungkur-236-pada-10-14-juni-2024-ada-apa?page=3

Muhammad, S., & Gohar, A. (2021). The relationship between fundamental analysis and stock returns based on the panel data analysis; evidence from Karachi Stock Exchange (KSE). Research Journal of Finance and Accounting, 9(3), 84–96. https://www.researchgate.net/publication/349298143

Natalia, D., Wahyu, C., Yulita, I. K., Sanata, U., & Yogyakarta, D. (2019). Stock Valuation Analysis Using the Dividend Discount Model, Price Earning Ratio and Price To Book Value for Investment Decisions. Jurnal Ilmiah Manajemen, 7(3), 276–285. http://www.ejournal.pelitaindonesia.ac.id/ojs32/index.php/PROCURATIO/index

Nurtyas, K. R., & Yudiantoro, D. (2023). Pengaruh Price Earning Ratio, Price to Book Value dan Inflasi terhadap Harga Saham Perusahaan Indeks LQ45 di BEI Tahun 2020-2022. Economics and Digital Business Review, 4(2), 350–361. https://doi.org/10.37531/ecotal.v4i2.513

Pamungkas, P., Achyani, F., & Witono, B. (2024). The Influence of Profitability, Asset Structure, Company Size, Corporate Governance, and Investment Opportunities on Stock Prices with Stock Returns as a Moderating Variable. Journal of Accounting and Finance Management, 5(2), 81–102. https://doi.org/10.38035/jafm.v5i2.438

Pennacchi, G. G., & Santos, J. A. C. (2021). Why do banks target ROE? Journal of Financial Stability, 54. https://doi.org/10.1016/j.jfs.2021.100856

Pike, R., & Neale, R. (2003). Corporate Finance and Investment: Decisions & Strategies.

Prasetyo, I., Aliyyah, N., & Rusdiyanto. (2021). Impact Financial Performance To Stock Prices: Evidence From Indonesia. Journal of Legal, Ethical and Regulatory Issues, 24(April), 1–11. https://doi.org/10.20944/preprints202104.0795.v1

Rahmawati, Y., & Hadian, H. N. (2022). The influence of Debt Equity Ratio (DER), Earning Per Share (EPS), and Price Earning Ratio (PER) on stock price. International Journal of Financial, Accounting, and Management, 3(4), 289–300. https://doi.org/10.35912/ijfam.v3i4.225

Ross, S., Westerfield, R., & Jaffe, J. (2002). Corporate Finance (6th ed.). New York: McGraw Hill.

Rusdiyanto, Hidayat, W., Tjaraka, H., Septiarini, D. F., & Fayanni, Y. (2020). The effect of earning per share, debt to equity ratio and return on assets on stock prices: Case study Indonesian. Academy of Entrepreneurship Journal, 26(2), 1–10.

Sarumpaet, T. L., Novatiani, R. A., Christina, V., Asikin, B., Novianto, R. A., & Akuntan, P. P. (2023). Implications of Debt to Asset Ratio, Return on Equity and Price to Book Value on Stock Prices (Study In The Consumer Goods Industry Sector Listed On The Idx For The Period 2017-2021). Jurnal Ekonomi, 12(02), 2023. http://ejournal.seaninstitute.or.id/index.php/Ekonomi

Sholichah, F., Asfiah, N., Ambarwati, T., Widagdo, B., Ulfa, M., & Jihadi, M. (2021). The Effects of Profitability and Solvability on Stock Prices: Empirical Evidence from Indonesia. Journal of Asian Finance, Economics and Business, 8(3), 885–894. https://doi.org/10.13106/jafeb.2021.vol8.no3.0885

Subastyan, G. M. (2024). The Effect of Financial Ratios on Stock Prices. Eduvest - Journal of Universal Studies, 4(3), 1244–1257. https://doi.org/10.59188/eduvest.v4i3.1098

Sugiarto, D. S. (2000). Metode Statistika untuk Bisnis dan Ekonomi. Jakarta; Gramedia Pustaka Utama.

Tandelilin, E. (2020). Portofolio dan investasi : teori dan aplikasi. Yogyakarta: Kanisius.

Teweles, R. J., & Bradley, E. S. (1992). The Stock Market. New Jersey: John Wiley and Sons.

Watung, T. A. N., Van Rate, P., & Jan, A. bin H. (2023). Pengaruh Capital Adequecy Ratio, Earning Per Share Ratio, Dividen Payout Ratio, Price Earning Ratio Dan Inflasi Terhadap Harga Saham Pada Perusahaan Perbankan Bumn. Jurnal EMBA : Jurnal Riset Ekonomi, Manajemen, Bisnis Dan Akuntansi, 11(1), 213–224. https://doi.org/10.35794/emba.v11i1.45655

Zarefar, A., & Armadani, A. (2024). Do Fundamental Financial Ratios Affect the Company’S Stock Price? Indonesia Evidence. Jurnal Akuntansi Dan Keuangan Indonesia, 21(1), 49–63. https://doi.org/10.21002/jaki.2024.03