Effect Of Earning Per Share (EPS) And Price Earning Ratio (PER) On The Value Of The Company In The Automotive And Transportation Sector Companies Listed On The Indonesia Stock Exchange (IDX) In The 2013-2016 Period

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Introduction

The automotive and transportation sectors are crucial components of the Indonesian economy, contributing significantly to the country's GDP. As a result, investors and companies alike are keenly interested in understanding the factors that influence the value of companies in these sectors. Two key metrics that are often used to assess a company's value are Earning Per Share (EPS) and Price Earning Ratio (PER). This study aims to investigate the effect of EPS and PER on the value of companies in the automotive and transportation sectors listed on the Indonesia Stock Exchange (IDX) during the 2013-2016 period.

Literature Review

EPS is a widely used metric to assess a company's profitability, while PER is a ratio that compares a company's stock price to its earnings per share. Both metrics are commonly used by investors to evaluate a company's value and potential for growth. However, the relationship between EPS, PER, and company value is not well understood, particularly in the context of the automotive and transportation sectors.

Methodology

This study uses secondary data from 21 companies listed on the IDX, resulting in 84 sample data (21 companies x 4 years). The data is analyzed using multiple linear regression techniques after going through classical assumptions tests, including normality tests, heteroscedasticity, multicollinearity, and autocorrelation.

Results

The results of the analysis showed that EPS had a significant positive influence on the company's value. This is evidenced by the t value of EPS count of 0.035 with a significance of 0.05, which shows that H1 is received. That is, the higher the EPS of a company, the company's value tends to increase.

On the other hand, the PER does not show a significant effect on the company's value. The value of t count per 0.106 with a significance of 0.05, so H2 is rejected. This means, the per-reliable ratio as a strong indicator in predicting the value of companies in the automotive and transportation sectors.

Simultaneously, both EPS and Per are proven to have a significant influence on company value. This is indicated by the calculated F value of 4,885 with a significance of 0.041, so H3 is accepted. That is, the regression model used is feasible to predict company value.

Correlation analysis shows that EPS and PER have a positive relationship with the company's value, although the relationship is relatively weak with the correlation coefficient of 0.257 or 25.7%. This means that other factors that are not included in this study (such as operational performance, macroeconomic conditions, and market sentiment) have a greater influence on company value.

Implications

The results of this study provide some important implications. For investors, this study shows that EPS is a key factor that needs to be considered in assessing the value of the company in the automotive and transportation sectors. Investors can use EPS as a reference for choosing a company that has a high value growth potential.

For companies, this research emphasizes the importance of increasing profitability to increase company value. Companies need to focus on strategies to increase profit and operational efficiency.

Further Development

This study has several limitations, such as the use of secondary data and relatively limited number of samples. For further research, it can be considered to use primary data, expand the research period, and include other variables that might affect the company's value.

Conclusion

This study shows that EPS has a significant influence on company value in the automotive and transportation sectors, while PER does not show a significant effect. The regression model used can be relied upon to predict company value.

It is essential to remember that the results of this study only apply to the automotive and transportation sectors in Indonesia during the 2013-2016 period.

Recommendations

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

  • Investors should consider EPS as a key factor in assessing the value of companies in the automotive and transportation sectors.
  • Companies should focus on increasing profitability to increase company value.
  • Further research should be conducted to explore the relationship between EPS, PER, and company value in other sectors and periods.

Limitations

This study has several limitations, including:

  • The use of secondary data, which may not be comprehensive or up-to-date.
  • The relatively limited number of samples, which may not be representative of the entire population.
  • The exclusion of other variables that may affect company value, such as operational performance, macroeconomic conditions, and market sentiment.

Future Research Directions

Future research should aim to address the limitations of this study by:

  • Using primary data to collect more comprehensive and up-to-date information.
  • Expanding the research period to include other time frames.
  • Including other variables that may affect company value, such as operational performance, macroeconomic conditions, and market sentiment.

By addressing these limitations and expanding the scope of the study, future research can provide a more comprehensive understanding of the relationship between EPS, PER, and company value in the automotive and transportation sectors.

Q: What is Earning Per Share (EPS) and how is it calculated?

A: EPS is a financial metric that measures a company's profitability by dividing its net income by the total number of outstanding shares. It is calculated by dividing the company's net income by the number of shares outstanding.

Q: What is Price Earning Ratio (PER) and how is it calculated?

A: PER is a financial metric that compares a company's stock price to its earnings per share. It is calculated by dividing the company's stock price by its EPS.

Q: What is the significance of EPS in assessing a company's value?

A: EPS is a key factor in assessing a company's value because it measures a company's profitability. A higher EPS indicates that a company is more profitable, which can lead to a higher stock price.

Q: What is the significance of PER in assessing a company's value?

A: PER is a ratio that compares a company's stock price to its EPS. A higher PER indicates that a company's stock price is higher than its EPS, which can be a sign of overvaluation.

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

A: This study shows that EPS is a key factor in assessing a company's value in the automotive and transportation sectors. Investors can use EPS as a reference for choosing a company that has a high value growth potential.

Q: What are the implications of this study for companies?

A: This study emphasizes the importance of increasing profitability to increase company value. Companies need to focus on strategies to increase profit and operational efficiency.

Q: What are the limitations of this study?

A: This study has several limitations, including the use of secondary data, relatively limited number of samples, and exclusion of other variables that may affect company value.

Q: What are the recommendations for future research?

A: Future research should aim to address the limitations of this study by using primary data, expanding the research period, and including other variables that may affect company value.

Q: What are the implications of this study for the automotive and transportation sectors?

A: This study shows that EPS is a key factor in assessing a company's value in the automotive and transportation sectors. Companies in these sectors should focus on increasing profitability to increase company value.

Q: Can the results of this study be applied to other sectors?

A: The results of this study are specific to the automotive and transportation sectors and may not be applicable to other sectors.

Q: What are the implications of this study for policymakers?

A: This study highlights the importance of increasing profitability in the automotive and transportation sectors. Policymakers can use this information to develop policies that support the growth of these sectors.

Q: What are the implications of this study for academics?

A: This study contributes to the existing body of knowledge on the relationship between EPS, PER, and company value. Academics can use this study as a basis for further research on this topic.

Q: What are the implications of this study for practitioners?

A: This study provides practical insights for practitioners in the automotive and transportation sectors. Practitioners can use this information to make informed decisions about investments and business strategies.