The Effect of Debt to Equity Ratio, Net Profit Margin, and Return on Equity on Price Earning Ratio in Agribusiness Companies Listed on the Indonesia Stock Exchange for the 2021-2025 Period

Niken Afifah Putriansyah; Ika Sari  Tondang; Taufik  Setyadi

doi:10.71435/741548

Authors

Niken Afifah Putriansyah Program Studi Agribisnis, Fakultas Pertanian, Universitas Pembangunan Nasional “Veteran” Jawa Timur, Indonesia
Ika Sari Tondang Program Studi Agribisnis, Fakultas Pertanian, Universitas Pembangunan Nasional “Veteran” Jawa Timur, Indonesia
Taufik Setyadi Program Studi Agribisnis, Fakultas Pertanian, Universitas Pembangunan Nasional “Veteran” Jawa Timur, Indonesia

DOI:

https://doi.org/10.71435/741548

Keywords:

Debt to Equity Ratio, Net Profit Margin, Return on Equity, Price Earnings Ratio, Agribusiness

Abstract

This study examines the influence of the Debt-to-Equity Ratio (DER), Net Profit Margin (NPM), and Return on Equity (ROE) on the Price-to-Earnings Ratio (PER) of agribusiness companies listed on the Indonesia Stock Exchange (IDX) during the 2021–2025 period. The agribusiness sector plays a strategic role in Indonesia's economy, yet its financial performance is characterized by commodity price volatility, climate uncertainty, and biological production cycles that may affect investors' valuation decisions. A quantitative research design was employed using secondary data obtained from the annual financial statements of fifteen agribusiness companies selected through purposive sampling, resulting in 75 firm-year observations. Panel data regression analysis was conducted using Stata 19, with the appropriate estimation model determined through the Chow, Hausman, and Lagrange Multiplier tests. The findings reveal that the Debt-to-Equity Ratio has no significant effect on the Price-to-Earnings Ratio, indicating that capital structure is not the primary consideration in investors' valuation of agribusiness firms. In contrast, the Net Profit Margin has a positive and significant effect on the Price-to-Earnings Ratio, suggesting that stronger operational profitability enhances investor confidence and market valuation. Meanwhile, Return on Equity exhibits a significant negative effect on the Price-to-Earnings Ratio, implying that investors evaluate not only current profitability but also earnings sustainability and future growth prospects. Simultaneously, DER, NPM, and ROE significantly influence the Price-to-Earnings Ratio. These findings contribute to the corporate finance literature by demonstrating that firm valuation in the agribusiness sector is driven more by profitability and growth expectations than by capital structure alone, highlighting the importance of considering sector-specific characteristics when evaluating investment decisions.

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