How Do Profitability, Risk, and Growth Expectations Affect Market Valuation? An Analysis of P/E and P/B Ratios
Main Article Content
The Indonesian capital market has developed rapidly in recent years, yet many retail investors still make investment decisions based on trends or unverified information rather than fundamental analysis. This study analyzes how various financial variables affect stock value using P/E and P/BV ratios as measures. The variables studied include DPR, ROE, growth potential, and market risk (Beta) in a sample of 183 Indonesian companies listed on the stock exchange and distributing dividends for the 2023 fiscal year. Audited financial statements were used as the main data source, and multiple linear regression analysis was used to analyze the data. Statistical analysis shows that DPR has a significant and positive effect on the P/E and P/BV ratios. Meanwhile, ROE has a significant but negative effect on the P/E ratio and a significant and positive effect on the P/BV ratio. Furthermore, Beta has a significant and negative effect on the P/E and P/BV ratios, while growth potential has no effect on either measure. These results provide valuable insights for investors and management regarding how various financial variables affect stock valuations influenced by the Indonesian capital market. These findings provide valuable insights for investors and management regarding how various financial variables affect stock valuations in the Indonesian capital market. For future research, it is suggested to use forward-looking growth measures such as analyst earnings forecasts or the Gordon Growth Model, as well as to explore macroeconomic variables and industry sectors to gain a more comprehensive understanding of the factors influencing stock valuation.
Atmariani, A. A. R., & Agustia, D. (2024). Return on assets, return on equity, earnings per share, dividend yield, and book-to-market ratio’s effects on stock return. *SOSIOHUMANIORA: Jurnal Ilmiah Ilmu Sosial dan Humaniora, 10*(1), 30–45.
Ayu, P., & Dewi, M. (2019). Pengaruh DPR terhadap PER pada sektor barang konsumsi. *Jurnal Ekonomi dan Bisnis, 11*(2), 45–56.
Badruzaman, M., Ridlo, A., & Fauzi, M. (2022). Determining the effect of ROE on PER and PBV in LQ45 companies Indonesia. *Jurnal Ekonomi dan Manajemen, 10*(1), 55–67.
Berliana, B., Ambarwati, S. D. A., & Yacobus, A. (2022). Determinants of capital market investment interest in the millennial generation in the COVID-19 pandemic. *International Journal of Economics, Business and Accounting Research (IJEBAR), 6*(2), 1600–1612.
Darmayanti, P. A., Wiagustini, L. P., Artini, L. G. S., & Candraningrat, I. R. (2023). Driving millennials to be investors: The case of investment decision performance in Indonesian capital market. *Calitatea, 24*(196), 167–174.
Ghozali, I. (2018). *Aplikasi analisis multivariate dengan program IBM SPSS 25* (9th ed.). Badan Penerbit Universitas Diponegoro.
Gujarati, D. N., & Porter, D. C. (2009). *Basic econometrics* (5th ed.). McGraw-Hill.
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2014). *Multivariate data analysis* (7th ed.). Pearson.
Hasnawati, S., & Ernie, H. (2022). Impact of behavioral factors among Indonesian individual investors toward investment decisions during the COVID-19 pandemic. *IOSR Journal of Economics and Finance, 13*(1), 43–52.
Hudiwijono, R. E. W., Aisjah, S., & Ratnawati, K. (2018). Influence of fundamental factors on dividend payout policy: Study on construction companies listed on Indonesian Stock Exchange. *Wacana Journal of Social and Humanity Studies, 21*(1).
Jasiyah, R. (2025). Understanding the impact of behavioral biases and financial literacy on investment choices: Evidence from Southeast Sulawesi. *JBTI: Jurnal Bisnis: Teori dan Implementasi, 16*(3).
Malkiel, B. G. (2019). *A random walk down Wall Street* (12th ed.). W. W. Norton & Company.
Putri, G. C. T., & Putri, E. (2023). The influence of return on assets (ROA), return on equity (ROE), debt to asset ratio (DAR), debt to equity ratio (DER), dividend payout ratio (DPR), and net profit margin (NPM) on stock prices. *The International Journal of Business Management and Technology, 7*(1), 580–591.
Rosdiana, R., Hariani, S., Pramudena, S. M., Bakti, I. G. M. Y., Syahlani, N., Utomo, A. W., Sumaedi, S., Widyanty, W., Prasetya, P., & Shiratina, A. (2026). Understanding the future of investment: An analysis of millennials and Generation Z. *Future Business Journal, 12*(1), Article 16.
Sinaga, A. C. B., Simanjuntak, R. M. P., & Silalahi, M. P. (2025). Market response to financial signals in Indonesia’s post-pandemic insurance sector. *Proceeding of International Conference on Finance, Economics, Management, Accounting, and Informatics (ICoFEMATICS), 1*(1), FIN-019.
Sudiyatno, B., Puspitasari, Y., & Andika, R. (2022). Pengaruh ROE, growth, dan beta terhadap valuasi saham. *Jurnal Keuangan & Investasi, 14*(1), 22–35.
Utami, N. (2020). Analysis of the influences of dividend payout ratio, return on equity, growth and firm size on stock value with leverage as mediating variable. *Jurnal Akademi Akuntansi, 3*(1), 44–59.
Utami, R. (2020). Pengaruh DPR dan ROE terhadap P/E dan P/BV pada perusahaan manufaktur. Universitas Negeri Semarang.
Wicaksono, A., & Suryani, E. (2021). Perilaku investor ritel dalam memilih saham viral. *Jurnal Psikologi Investasi, 5*(2), 44–52.
Yahya, M. S., Juwita, R., Mandang, J. Z., & Dwianti, L. (2022). Investment decision of cryptocurrency in millennials and Gen Z. In *Proceedings of the International Conference on Applied Science and Technology on Social Science 2022 (ICAST-SS 2022)*.
Zega, S. H., & Satato, Y. (2025). Exploring factors influencing millennial generation investment decisions in Indonesian capital market: A phenomenological study approach. *Accounting and Finance Studies, 5*(1), 67–81.
