1. Intoduction
- Background
Stock price is an important factor affecting investors in investment decisions. Stock price reflects the return on capital that will be accompanying capital gains. The greater the profit generated an issuer, will provide greater returns for investors that will also affect the stock price increases.
Ratio analysis is a tool used to help analyze the financial statements of the company so as to know the strengths and weaknesses of a company. Ratio analysis also provides indicators that can measure the level of profitability, liquidity, income, use of corporate assets and liabilities. In Scientific Writing ratios used were Return on Equity (ROE) and Earnings Per Share (EPS).
Earning per Share (EPS) is the ratio between the net profit after tax by the number of shares. EPS of a company’s information shows the magnitude of net income that is ready to be distributed to all shareholders of the company. When Earning per Share (EPS) of the company is high, the more investors are willing to buy the stock, causing the stock price will be high.
Return on Equity (ROE) is the ratio between the net income of the equity owned by the company. ROE is the best model in predicting returns. ROE is calculated by taking the profit after tax preferred stock dividends of a given year and dividing by the book value of equity at the beginning of the year.
Based on the above, we can see the role of the financial performance of a company is very important to the stock price to attract investors to invest their capital to the company. Therefore, the authors are interested in writing with the title “Analysis of Return On Equity (ROE) and Earnings Per Share (EPS) on Stock Price PT. Aneka Tambang Tbk
- Problem
- How is the relationship between Return On Equity (ROE) and Earnings Per Share (EPS) on stock prices at PT. Antam, Tbk
- How is the effect of Return On Equity (ROE) and Earnings Per Share (EPS), the price of shares in PT Antam, Tbk
- Purpose
- Determine the relationship of the return on capital, market appreciation and income shares of the stock price PT. Aneka Tambang Tbk., The period 2008 – 2011
- Know how far the extent of ROE and EPS may affect price PT. Aneka Tambang Tbk., The period 2008 – 2011
- Advantage
- Academic Benefits:
a. This research can expand the knowledge and understanding of the sources of corporate funds, financial leverage, Return On Equity (ROE) and Earnings Per Share (EPS).
b.This study can be used as a reference for other researchers who want to conduct similar research
2. Practical Benefits:
Results of this study are expected to provide input and consideration for corporate management to make decisions regarding strategic aspects related to stock and inputs / resources to improve financial performance.
2. Discussion
2.1 Understanding Capital Market
According to the Capital Market Law no. 8 Capital Markets in 1995 as an activity that is concerned with the public offering and trading of securities, public companies relating to the issuance of securities, as well as institutions and professions related to the effect.
Capital markets (capital market) is a market for a variety of long-term financial instruments that can be traded, either in the form of debt or equity capital. (Fakhruddin 2000,1)
2.2 Understanding Stocks
Stock can be defined as the most pure and simple form of ownership of the company. (Gitman: 2000.7). Stock is a piece of paper stating ownership of most firms. (Bernstein: 1995.197). Stock is a security that has a claim against the income and assets of a company. Securities themselves can be interpreted as a claim on future income of a borrower being sold by the borrower to the lending, often called financial instruments. (Mishkin: 2001.4). Meanwhile, according to Husnan, (2003) shares are securities that shows ownership of the company so that shareholders have the right to claim for dividends or other distributions by the company to its shareholders, including the right to claim on the assets of the company with the right to claim priority after other securities fulfilled if there liquidity. Stock is evidence for investors to acquire property rights to the company and contribute to the company’s wide range of conditions.
The higher the price the higher the profitability of stock to be received in the form of dividends, conversely the lower the price is acceptable profitability will also be low. Stock prices are high enough to provide benefits, in the form of capital gains and a better image for the company making it easier for management to obtain funding from outside the company. According to Sartono (2001:70) “the stock market prices are formed through the mechanism of supply and demand in the capital market.” Stock price changes up and down from one time to another time. The change is dependent on the strength of demand and supply. If a stock is oversubscribed, then the stock price will tend to rise. Conversely, if excess supply, then the stock price tends to fall.
2.3 Types of shares
By way of the transfer, basically stock shares can be divided into two types, namely:
a. Bearer shares
This type of stock is not written down the name of the owner. Shareholder performance can be easy to transfer or move it to other people because it is the same as money.
b. Shares on behalf of
This type of stock, write the name of the owner, at the owner’s name written stock certificates. How to transition to transition documents and then the name of the owner is recorded with a company that specialized book lists the names of shareholders. If the stock is lost, the owner can request instead.
Meanwhile, based on the benefits derived by the owner, the stock is also divided into two types, namely:
a. Ordinary shares
Common Stock (Common Stock) Common stock is the effect of the inclusion of ownership (equity security) of the business entity Limited Liability Company. Common stock gives assurance to participate daiam daiam profits dividends, if the company obtained laba.Menurut Dahlan Siamat (1995:385), traits – traits of common stock are as follows:
a. Dividends paid during the company makes a profit.
b. Have voting rights (one share one vote).
c. Entitled to receive dividends if insolvent company’s assets do d. after all the liabilities of the company repaid.
b. Preferred Stock (Preferred Stock)
Is a stock that has the nature of a combination of bonds and common stock. The characteristics of preferred stock according to Dahlan Siamat (1995:385) are:
a. Have the first right to obtain dividends.
b. Do not have voting rights,
c. Could affect the company’s management, especially in the nomination committee.
d. Has the right to a maximum payment of par value shares advance after the creditors if the company is liquidated.
2.4 Factors Affecting the Stock Price.
1. Internal Factors
a. Announcements about marketing, production, sales as advertising, contract details, price changes, new product recall, report production, and sales reports.
b. Announcement of funding (financing announcements), such as announcements with equity and debt.
c. Announcements agency management directors (management board of director-announcements) like change and change directors, management, and organizational structure.
d. Announcement of the takeover of diversification, such as a merger report, equity investments, report taken over by the acquisition and acquired, divestitures and other reports.
e. Announcement of investment (investment annuncements), such as plant expansion, research and development, closure of other businesses.
f. Announcements employment (labor announcements), as new negotiations, new contracts, and other strikes.
g. Announcement of the company’s financial statements, such as forecasting earnings before the end of the fiscal year and after the end of the fiscal year, Earning Per Share (EPS) and Dividend Per Share (DPS), Price Earning Ratio, Net Profit Margin, Return on Assets (ROA) etc.
External factors (macro environment) that influence stock prices include among others:
a. Announcement of the government such as changes in interest rates on savings and time deposits, foreign exchange rates, inflation, as well as various regulatory and economic deregulation issued by.
b. Announcement of law (legal announcements), such as employee claims against the company or the company’s manager and demands against her manager.
c. Announcement of the securities industry (securities announcements), such as the annual meeting reports, insider trading, stock trading volume or price, restrictions / delays trading.
d. Domestic political turmoil and fluctuations in the exchange rate is also a significant factor in the movement of share prices on the stock exchange of a country.
e. Various issues both domestically and abroad.
Other factors that could affect the stock price movements are external constraints such as economic activity in general, and the state of the stock market tax.
In the analysis of the influence of ROE and EPS of the stock price, then the author of the report summarizes the performance of the market in the form of the closing stock price of 2008 to 2011. Below is a table of stock prices.
Stock Price PT. Antam, Tbk.
2008 – 2011
Year |
Closing Price |
2008 |
1.090 |
2009 |
2.200 |
2010 |
2.450 |
2011 |
1.620 |
Return On Equity (ROE)
Return On Equity based formula as follows:
To be able to calculate the ROE, it must know the amount of net income and equity. ROE is a measure of profitability gains over a certain period. The following table presents how much net income, capital, and ROE of the company.
ROE PT. Antam, Tbk.
2008 – 2011
Year |
Net Profit (In Million) |
Equity (In Million) |
ROE |
2008 |
Rp. 1.368.139 |
Rp. 5.717.254,492 |
23,93 |
2009 |
Rp. 604.307 |
Rp. 6.281.777,547 |
9,62 |
2010 |
Rp. 1.683.400 |
Rp. 7.096.694,587 |
23,72 |
2011 |
Rp. 1.560.257 |
Rp. 7.697.370,498 |
20,27 |
Source: Balance Sheet data is processed
Earning Per Share
EPS based on the following formula :
|
To be able to calculate the EPS, it should be known the magnitude of net income and number of shares. EPS itself is the ability to distribute the income to shareholders. The following table presents the amount of EPS per year.
EPS PT. Antam, Tbk.
2008 – 2011
Year |
Net Profit (In Million) |
∑ Shares
|
EPS |
2008 |
Rp. 1.368.139 |
9.538.722.722 |
143,43 |
2009 |
Rp. 604.307 |
9.539.179.163 |
63,35 |
2010 |
Rp. 1.683.400 |
9.538.217.643 |
176,49 |
2011 |
Rp. 1.560.257 |
9.538.189.265 |
163,58 |
Source: Balance Sheet data is processed
Correlation Analysis and Hypothesis Testing Variables ROE and EPS On The Stock Market
To determine the relationship of Return on Equity and Earnings Per Share of the stock price correlation tests performed on these variables using SPSS.19
Correlations |
||||
Harga saham | ROE | EPS | ||
Harga saham | Pearson Correlation | 1 | -,326 | -,075 |
Sig. (2-tailed) | ,674 | ,925 | ||
N | 4 | 4 | 4 | |
ROE | Pearson Correlation | -,326 | 1 | ,921 |
Sig. (2-tailed) | ,674 | ,079 | ||
N | 4 | 4 | 4 | |
EPS | Pearson Correlation | -,075 | ,921 | 1 |
Sig. (2-tailed) | ,925 | ,079 | ||
N | 4 | 4 | 4 |
From the above table it can be seen that the use of the 4 data obtained correlation coefficient (R) between the variables X1 ROE Share Price is equal to -0.326 with a two-sided significance level (2-tailed) of 0.01. This figure shows the relationship or correlation between the stock price with ROE at PT. Antam, Tbk is a negative relationship and have the property that increases in the variable X (ROE) causes the opposite situation, namely a decrease in the variable Y (Share Price). While the correlation coefficient between the variable X2 with EPS stock price is equal to -0.075. Means EPS and stock price relationship is negative and has the property that the increase in variable X (EPS) causes the opposite situation, namely a decrease in the variable Y (Share Price).
Correlation coefficients of ROE, EPS and Stock Price Model Summary |
||||
Model | R | R Square | Adjusted R Square | Std. Error of the Estimate |
1 | ,664a | ,440 | -,679 | .09775 |
a. Predictors: (Constant), EPS, ROE |
From the above table it can be seen the value of the correlation coefficient (R) between the variables X (ROE and EPS) on Stock Price (Y) of 0.664 means that the relationship between the stock price and EPS ROE amounted to 66.40%
To see the effect can be seen in the coefficient of determination (R Square / R2) is equal to 0.440 or by 44%. So it can be concluded that the variation of ROE and EPS PT. Antam, Tbk has the effect of 44% to a high or low stock price PT. Antam, Tbk, while other variables were not examined in this paper has the effect of 56% which is the remainder. From the above table can also be known Adjusted R Square value of -0.679 which means the stock price variation can be explained by variations in ROE and EPS of -0.679.
While the Standard Error of Estimate (SEE) is equal to 0.09775 mean deviation between the regression equations with dependent real value, that is equal to 0.09775. This shows that the regression equation is established to serve as a viable predictive tool. The smaller the value of the Standard Error of Estimate (SEE), the better the regression as a predictive tool.
F test (ANOVA) ROE, EPS On The Stock Market ANOVAb |
||||||
Model | Sum of Squares | Df | Mean Square | F | Sig. | |
1 | Regression | ,008 | 2 | ,004 | ,393 | ,748a |
Residual | ,010 | 1 | ,010 | |||
Total | ,017 | 3 | ||||
a. Predictors: (Constant), EPS, ROE
b. Dependent Variable: hargasaham
|
To see whether the significant effect of the independent variables on the dependent variable and determine whether the regression equation to be created can be used or not to predict the dependent variable, we used ANOVA.
hypothesis:
H0 = ROE and EPS together did not affect significantly (significantly) on stock prices
Ha = ROE and EPS jointly affect significantly (significantly) on stock prices
- degree of free : (df) n= k-1
= 3-1
=2
d = N-k
= 4-3
= 1
- Ftable = 18,51
- Fcount = 0,393
- Probability = 0,74
Ho Ha
0,393 18,51
From the above ANOVA, F value obtained was 0.393, with a significance level of 0.748. Because Fcount <Ftable then Ho is accepted. Decision-making can also be done by looking at the probability that 0748 value greater than 0.05 so H0 is accepted. That is, the independent variable (ROE and EPS) did not significantly affect the dependent variable (stock price).
T Test of ROE dan EPS on The Stock Market
Coefficientsa |
||||||
Model | Unstandardized Coefficients | Standardized Coefficients | t | Sig. | ||
B | Std. Error | Beta | ||||
1 | (Constant) | ,264 | ,170 | 1,553 | ,364 | |
ROE | -,019 | ,022 | -1,694 | -,881 | ,540 | |
EPS | ,002 | ,003 | 1,485 | ,772 | ,581 | |
a. Dependent Variable: hargasaham |
Having regard to the above table, the regression equation is obtained :
Y = 0,264 – 0,019X1+ 0,002X2
Y = Stock Price
X1 = ROE
X2 = EPS
Constant value of 0.264 means that if the level of EPS and ROE is equal to 0 then the stock price will amount to 0.264. Rate coefficient of ROE is the regression coefficient of ROE. From the above table it can be seen if the ROE increased by one unit, then the stock price will fall by -0.019. While the level of variable coefficients EPS of 0.02 means that if EPS increases by one unit, then the stock price will increase by 0.02. From the above table it can be seen also that the standard error ROE of 0.22 and standard error of EPS of 0.03. The smaller the deviations in the regression coefficient, the greater the contribution of these variables to the dependent variable To test the significance of regression coefficients, ie whether the independent variable (ROE) significant effect or not on the dependent variable (stock price), it will use the t test. hypothesis:
H0 = ROE no significant effect (significant) on Stock Price
Ha = ROE affect significantly (significantly) on Stock Price
- ttable = ±2,776
- tcount = -0,881
- Probability = 0,540
Ho
Ha Ha
-0,2776 -0,881 2,776
Therefore ttable> t then Ho is accepted, meaning that ROE has no significant effect on the stock price. Decision-making can also be done by looking at the probability that the value of 0.54 greater than 0.05 so H0 is accepted. To test the significance of regression coefficients, whether the independent variable (EPS) or no significant effect on the dependent variable (stock price), it will use the t test.
Hypothesis:
H0 = EPS had no significant effect (significant) on Stock Price
Ha = EPS affect significantly (significantly) on Stock Price
- ttable = ±2,776
- tcount = 0,772
- Probability = 0,581
Ha Ho Ha
-0,2776 0,772 2,776
Therefore ttable> t then H0 is accepted, meaning that EPS does not have a significant effect on the stock price. Decision-making can also be done by looking at the probability that the value of 0.640 greater than 0.05 so H0 is accepted.
3.Conclusion
Therefore ttable> t then H0 is accepted, meaning that EPS does not have a significant effect on the stock price. Decision-making can also be done by looking at the probability that the value of 0.640 greater than 0.05 so H0 diterima.Berdasarkan research and discussion that has been done in previous chapters it could be concluded as follows:
1.Analysis of the influence of Return On Equity (ROE) and Earnings Per Share (EPS) on P PT ANTAM, Tbk through F test showed no association with the level of correlation 0.664. This means that the increase in variable X (ROE and EPS) cause an increase in the variable Y. Based on the ANOVA test between the stock price and the ROE obtained F value = 0.339 where the value is smaller than F table = 18.51 so that H0 is accepted and based on t-test between the stock price diperolehttabel ROE = ± 2.776 which is more than the value of t = -0.881, then H0 is accepted, meaning that ROE has no significant effect on the company’s stock price. While based on the t test between stock price and EPS derived table = ± 2.776 which is more than the value of 0.772, which means the variable EPS has no effect on stock prices.
2. ROE and EPS did not show a significant contribution to the stock price. Increase in ROE and EPS are not followed by a rise in stock prices, decline in ROE and EPS were also not followed by a decline in stock prices. In terms of relation to the company’s fundamentals, the stock price has not been able to demonstrate that formed the true value of the company.
4.Bibliography
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