THE INFLUENCE OF PROFITABILITY RATIOS AND STOCK PRICE OF THE CAPITAL GOODS SECTOR (A CASE STUDY OF UNITED TRACTORS, PERIOD 2006 – 2013)

Abstract

This research aims to test the effect of independent variables, profitability ratios (Return on Assets, Return on Invested Capital, and Return on Capital Employed) towards the dependent variable, which is stock price of the capital goods sector. The research type is a mixed research: the quantitative analysis is the base of the analysis of the research, and the explanation from external factors in this research is supported by qualitative analysis. The sample collection method taken for this research is sequential explanatory. Data used in this research is based on the annual and quaterly consolidation report of United Tractors from 2006 to 2013, which results in the amount of 32 samples. During the research period, the data shown was normally distributed. Based on the classical assumption test, and heterocedasticity test, there were not any deviant variables, so it shows that the data provided is qualified for use in the multiple regression model. The result of the research shows that Return on Assets (ROA) and Return on Capital Employed (ROCE) have a partial significant effect towards stock price with a level of significance less than 5%. The Return on Invested Capital (ROIC) shows that it does not have a significant effect towards stock price with a significance level of more than 5%. Simultaneously, ROA, ROIC, and ROCE have a significant effect towards stock price. The coefficient of determinant from these three variables toward stock price is 66%, and the remaining 34% is affected by issue factors (external factors) which explained the problem of negative correlation in 2011. To find the issue factors that influence the negative correlation of profitability in 2011, this research completes the answers through interviews of internal professionals. This research prove it the the profitability ratio can not be measure only by the percentage increase or decrease but the investors must see the factor make the profitability ratio increase or decrease. The external factor of country condition are also give impact to the movement of stock price in capital good sector.