Indofood Stock Valuation Driven by Broader Market Drivers Rather Than Debt and Profit Ratios

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FORMOSA NEWS

Researcher Agus Salim from Universitas Pamulang published a financial study examining the valuation drivers of Indonesia's largest food manufacturing enterprise, PT Indofood Sukses Makmur Tbk. Published in August 2026 in Jurnal Multidisplin Madani (MUDIMA), the empirical investigation evaluates how capital structure and profitability metrics influenced the company's Price Earnings Ratio (PER) on the Indonesia Stock Exchange between 2013 and 2022. The findings reveal that neither leverage nor profitability ratios dictated investor valuation of the firm during the ten-year period, challenging traditional assumptions in corporate financial analysis.

Financial ratio analysis remains a cornerstone for equity valuation, portfolio selection, and corporate financial planning in capital markets worldwide. Traditional financial literature routinely points to the Debt to Equity Ratio (DER) as a key measure of capital structure risk and Return on Equity (ROE) as the primary indicator of managerial efficiency. However, previous empirical studies in emerging economies like Indonesia have produced conflicting conclusions regarding how leverage and profitability affect stock market valuation. Establishing whether standard financial metrics drive market expectations for major consumer goods companies is crucial for asset managers, retail investors, and corporate strategists evaluating emerging market equities.

To resolve these conflicting views, Agus Salim of Universitas Pamulang implemented a quantitative research model using audited secondary financial data. The study examined financial statements from PT Indofood Sukses Makmur Tbk covering ten consecutive fiscal years from 2013 through 2022, sourced directly from the Indonesia Stock Exchange and corporate disclosures. Using IBM SPSS Statistics, the author performed standard classical assumption tests to ensure Ordinary Least Squares validity before conducting multiple linear regression, hypothesis testing, and determination coefficient calculations.

The empirical results demonstrate that conventional financial ratios played a negligible role in determining market valuation for the food and beverage titan:

• Debt to Equity Ratio (DER) Impact: Partial hypothesis testing (t-test) revealed a significance value of $p = 0.938$, indicating that variations in debt leverage had no statistically significant effect on the company's PER.
• Return on Equity (ROE) Impact: Profitability analysis yielded a significance value of $p = 0.347$, showing that accounting profitability changes failed to drive corresponding shifts in investor valuation.
• Simultaneous Model Performance: The combined F-test yielded a significance value of $p = 0.622$, confirming that DER and ROE jointly exerted no statistically significant impact on PER.
• Explanatory Capability: The coefficient of determination ($R^2$) showed that the two independent variables explained only 12.3% of the total variance in PER, leaving 87.7% attributed to unmodeled external factors.

The findings carry strategic implications for market participants, corporate managers, and financial analysts. Equity investors and fund managers are advised to look beyond simple leverage and accounting profitability metrics when building valuation models for large consumer goods firms in emerging markets. Instead, market valuation relies on a wider matrix of qualitative and quantitative factors, including long-term earnings sustainability, dividend policy expectations, brand equity, macroeconomic conditions, and broader market sentiment. Corporate executives can utilize these insights to focus on strategic growth drivers and operational resilience rather than attempting short-term financial ratio manipulation to influence market pricing.

"The empirical feedback discloses that neither DER nor ROE furnishes a mathematically prominent weight on the institution's PER, either discretely or systematically. This data implies that leverage and profitability isolated are unaligned with explaining deviations in the market valuation of PT Indofood Sukses Makmur Tbk. Instead, investors appear to evaluate firm value using broader financial and non-financial information, including future growth prospects, macroeconomic conditions, corporate governance, and market expectations."

— Agus Salim, Universitas Pamulang

Author Profile

Agus Salim is a researcher and academician affiliated with Universitas Pamulang, located in South Tangerang, Banten, Indonesia. His primary area of research expertise encompasses corporate financial management, capital structure analysis, equity valuation models, and financial ratio evaluation within listed companies on the Indonesia Stock Exchange.

Research Source Information

Article Title: The Influence of Debt to Equity Ratio (DER) and Return on Equity (ROE) on Price Earnings Ratio (PER) at PT Indofood Sukses Makmur Tbk Listed on the Indonesia Stock Exchange for the 2013-2022 Period
Journal: Jurnal Multidisplin Madani (MUDIMA)
Publication Year: 2026
DOI : https://doi.org/10.55927/mudima.v6i8.113

URL : https://journalmudima.my.id/index.php/mudima