Malang – A 2026 study by Widanarni Pudjiastuti from Malangkucecwara College of Economics reveals that Price to Earnings Ratio (PER), a widely used investment indicator, does not significantly influence stock prices in Indonesia’s basic materials sector. The research, published in the International Journal of Scientific Multidisciplinary Research (IJSMR), analyzes companies listed on the Indonesia Stock Exchange (IDX) between 2021 and 2024 and highlights how asset size and debt structure shape market perceptions without directly driving stock price movements.
The findings arrive at a time when Indonesia’s basic materials sector continues to attract investor attention due to its strategic role in industrial supply chains. Investors often rely on financial ratios such as PER to evaluate company performance and future prospects. However, this study challenges that assumption by showing that PER may not be as निर्णing in stock valuation as commonly believed.
The research addresses a broader issue in financial markets: the complexity of factors influencing stock prices. While traditional financial theory suggests that profitability indicators like PER should strongly correlate with stock performance, real-world market behavior often reflects a more intricate interplay of variables, including macroeconomic conditions and investor sentiment.
Using a quantitative approach, Widanarni Pudjiastuti analyzed financial data from basic materials companies listed on the IDX main board. The study applied Partial Least Squares (PLS) analysis using SmartPLS 4.0 software to examine both direct and indirect relationships between total assets, Debt to Equity Ratio (DER), PER, and stock prices. This method enabled a comprehensive evaluation of how these variables interact within the market.
The results show that company assets have a positive and significant effect on PER. Larger firms with more substantial assets tend to have higher PER values, suggesting that investors associate size with stability and future earning potential. Similarly, DER also demonstrates a positive and significant influence on PER, indicating that capital structure decisions—particularly the use of debt—shape investor perceptions of company value.
Despite these relationships, PER does not significantly affect stock prices in the sector. This finding stands out as the central conclusion of the study. It indicates that although PER reflects market expectations, it does not directly translate into stock price changes for basic materials companies on the IDX.
Further analysis reveals that PER also fails to act as an effective mediating variable between assets and stock prices, as well as between DER and stock prices. In other words, while assets and DER influence PER, that influence does not carry through to stock price movements via PER.
Widanarni Pudjiastuti of Malangkucecwara College of Economics emphasizes that investors should not rely solely on PER when making investment decisions. According to her analysis, financial ratios must be interpreted within a broader context that includes external economic conditions and market dynamics. She notes that stock price formation involves multiple factors beyond traditional valuation metrics.
The implications of this research are significant for several stakeholders. For investors, the findings encourage a more comprehensive analytical approach. Relying exclusively on PER may lead to incomplete or misleading conclusions about a company’s market value. Instead, investors are advised to consider a wider range of indicators, including operational performance, industry trends, and macroeconomic signals.
For corporate management, the study highlights the importance of asset growth and capital structure management in shaping investor perceptions. However, increasing assets or optimizing debt levels does not automatically result in higher stock prices. Companies must also focus on transparency, communication, and consistent financial performance to build investor confidence.
For policymakers and market regulators, the research underscores the need to improve the availability and quality of financial information. A more transparent and data-rich environment can help investors make better-informed decisions and reduce overreliance on single financial indicators such as PER.
This study contributes to the growing body of financial research that questions conventional assumptions about stock valuation. It demonstrates that the relationship between financial performance indicators and stock prices is not always straightforward, particularly in emerging markets like Indonesia.
By revealing that PER does not serve as a direct determinant of stock prices in the basic materials sector, Widanarni Pudjiastuti provides a valuable perspective for both academic research and practical investment strategies. The findings reinforce the importance of adopting a holistic view of market analysis in an increasingly complex financial landscape.
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