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THE EFFECT OF RETURN ON EQUITY (ROE), EARNING PERSHARE (EPS), NET PROFIT MARGIN (NPM), INFLATION AND INTEREST RATE

ON STOCK PRICE (A Study on Food and Beverage Companies Listed in Indonesian Stock Exchange (IDX) Year 2010 – 2014)

 Fauzi Hidayat1, Andarwati2

Abstract

This Research aims to explain whether micro and macro fundamental factors proxied by return on equity (ROE), earning per share (EPS), net profit margin (NPM), inflation, and interest rate effect stock price of food and beverage companies listed in Indonesia Stoxk Exchange (IDX) year 2010 - 2014. Food and beverage company is one of the sectors that have high contribution to GDP Indonesia. The secondary data was retrieved from Indonesia Capital Market Directory (ICMD) and Bank Indonesia (BI) monetary publication. The data were then analyzed by using Quantitative Methods i.e., multiple regression analysis based on SPSS platform. Research finding shows positive correlation between ROE, EPS, and NPM, and stock price of food and beverage companies means that when the increase of ROE, EPS, and NPM will imrpove the stock price. Meanwhile, negative correlation between inflation and interest rate, and stock price food and beverage companies means that when the decrease of inflation and interest rate will decrease the stock price.In addition, the research explains that return on equity has the dominant effect on the stock price of food and beverage companies.

Keywords: ROE, NPM, EPS, Inflation, Interest Rate, Stock Price

Abstrak

Penelitian ini bertujuan untuk menjelaskan apakah mikro dan makro faktor fundamental yang ditunjukkan oleh return on equity (ROE), earning per share (EPS), margin laba bersih (NPM), inflasi, dan harga saham efek tingkat bunga perusahaan makanan dan minuman yang terdaftar di Indonesia Stoxk Exchange (IDX) tahun 2010 - 2014. Makanan dan minuman perusahaan adalah salah satu sektor yang memiliki kontribusi tinggi terhadap PDB Indonesia. Data sekunder diambil dari direktori Indonesia Capital Market (ICMD) dan Bank Indonesia (BI) publikasi moneter. Data kemudian dianalisis dengan menggunakan Metode Kuantitatif yaitu, analisis regresi berdasarkan pada platform SPSS. Hasil penelitian menunjukkan korelasi positif antara ROE, EPS, dan NPM, dan harga saham perusahaan makanan dan minuman berarti bahwa ketika peningkatan ROE, EPS, dan NPM akan imrpove harga saham. Sementara itu, korelasi negatif antara inflasi dan suku bunga, dan perusahaan makanan dan minuman harga saham berarti bahwa ketika penurunan inflasi dan suku bunga akan menurun penambahan saham price.In, penelitian menjelaskan bahwa return on equity memiliki efek dominan pada saham harga perusahaan makanan dan minuman. Kata Kunci: ROE, NPM, EPS, Inflasi, Suku bunga, dan Harga Saham

 

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INTRODUCTION The funding sources for the company are obtained from debt and private

equity. Both of these funding sources have different investment risks (cost of capital). For the purpose of long-term investment, companies tend to choose sources of funding from private equity because it gives an advantage with a longer time compared to debt capital. In this position, the financial market provides space and opportunities for companies to obtain funds with relatively low investment risk in accordance to the investment objectives of the company.

The definition of financial market according to Eduardus Tandelilin (2001:13), is a market in which people trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies/ governments who make a long-term investments. One of security forms that are traded in the financial market is stock. The stock is one of the commodities that are traded in financial markets as a form of investment by investors and expected to provide benefits.

Currently, companies listed in Indonesian Stock Exchange are consist of 9 sectors, among others: (1) Main Sector, (2) Mining Sector, (3) Basic Industry and Chemistry Sector, (4) Miscellaneous Industry Sector, (5) Consumer Goods Sector, (6) Property Sector, Real Estate and Construction Building Sector, (7) Infrastructure, utilities and transportation Sector, (8) Financial Sector, and (9) Trade, Services and Investment Sector. One of the company that interested to be describe is food and beverage companies. Food and beverage companies is expected to be able to improve their company performance. Food and beverage company is one of the sub sectors that have high contribution to GDP in Indonesia. If GDP is rising, the economy is better and the nation is moving forward. (Samoedra and Susanti, 2015:2). Food and beverage companies has high level of liquidity stock that reflects the supply and demand of stock prices that are 60-65% of the total Rp.12,582,000,000 consumer goods sector listed on the Indonesia Stock Exchange (IDX). The liquidity also implies that a stock can be sold without materially affecting the market price. In other words, liquidity describes the stock price can be quickly bought or sold in the market without seeing a change in price because stock price are formed by market players and determined by demand and supply of stock price in the market. (Jogiyanto, 2000:8). Basically, there are two factors that affect stock price changes namely fundamental factors of micro and fundamental factors of macro (Mohammad Samsul, 2006:200).

The first factors is micro fundamentals, reflected the company's financial performance whether is good or bad. The companies use financial statement analysis to know the fundamentals and financial performance in decsion making proses for investor to buy stock of food and beverage companies. According to Ehrhardt and Brigham (2011: 210) the financial statement analysis is the process of reviewing and analyzing a company's financial statements to make better company decisions. Common methods of financial statement analysis include the use of financial ratios, fundamental analysis, DuPont analysis, and horizontal and vertical analysis. According to Ehrhardt and Brigham (2011: 243) Financial ratios are very powerful tools to perform some quick analysis of financial statements. Fianancial ratio analysis is a useful management tool that will improve your

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understanding of financial results and trends over time, and provide key indicators of organizational performance (Van Horne and Wachowicz, 2008: 130). Managers will use ratio analysis to pinpoint strengths and weaknesses from which strategies and initiatives can be formed. Moreover the ratio analysis allows the financial manager and the parties concerned to evaluate the financial condition indicating whether the company is in a healthy condition. The function of the ratio of financial information analysis can convince investors to pick stocks of food and beverage companies. Therefore, here are some financial ratios that can be analysed for the effect of stock prices; (1) Return on Equity (ROE), is the amount of net income returned as a percantage of shareholders equity (Van Horne and Wachowicz, 2008: 150-151). (2) Earnings per share (EPS) is a market prospect ratio that measures the amount of net income earned per share of stock outstanding. (Van Horne and Wachowicz, 2008:428). (3) Net profit margin is a profitability ratio that measures the amount of net income earned with sales generated by comparing the net income and net sales of a company. (Van Horne and Wachowicz, 2008:151).

The second factor is macro fundamental factors. According to Blanchard and Johnson (2013: 5) macroeconomic is a branch of economics dealing with the economy condition in a country. The economic conditions provide important insights to investors and businesses (Mankiw, 2010: 54). Investors use indicators of economic conditions to adjust their views on economic growth and profitability. An improvement in economic conditions would lead investors to be more optimistic about the future and potentially invest more as they expect positive returns. According to Mankiw (2010: 94) changes in the prediction economy’s have a major impact on companies stock prices. The common factors that can affect economy are: interest rate, economic outlook, inflation, deflation, economic and political shocks, change in economic policy, and the value of Indonesian currency. Therefore, here are some common factors that can be analysed for the effect of stock prices: 1) Inflation is the devaluation of a currency marked by a sustained trend of rising prices in the economy (Blanckhard and Johnson, 2013: 56). Businesses are profitable and hire aggressively to match production with demand. Tight labour markets lead to wage increases. This leads to a higher cost of living with higher rents, home values, consumer prices and prices of raw materials. This represents further increased demand for products and services, which also increase prices, further increasing company profits. 2) Interest Rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets (Blanckhard and Johnson, 2013: 56).

Based on the above previous research, the variables that affect stock price show the different results between one research result and the others. This makes the researcher interested in conducting a research with the title “The Effect of Return On Equity (ROE), Earning Per Share (EPS), Net Profit Margin (NPM), Inflation and Interest Rate On Stock Price In Food And Beverage Companies Listed in Indonesian Stock Exchange (IDX) year 2010 – 2014."

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Return On Equity (ROE) ROE is measure the company's ability to obtain income available to

shareholders of the company. The larger the ROE, it indicates the number of preferred shares that can be produced from each share. The formula used is as follows: (Brigham and Houston, 2011:100).

ROE =

Earning Per Share (EPS)

EPS is a ratio that indicates how much profitv(return) is obtained by investors or shareholders per share. It is done by dividing net income with the number of outstanding shares in the percentage size. Van Horne and Wachowicz (2008: 428-429)

𝐸𝑃𝑆 =𝑁𝑒𝑡  𝐼𝑛𝑐𝑜𝑚𝑒

𝐶𝑜𝑚𝑚𝑜𝑛  𝑆ℎ𝑎𝑟𝑒𝑠  𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

Net Profit Margin (NPM)

NPM measure the company's ability to obtain net income from operations of the company. According to Van Horne and Wachowicz (2008: 149) the formula used is as follows:

NPM =

Inflation

Inflation is represented by inflation sensitivity, which is the level of influence the change of inflation against net profit after tax of food and beverage company that listed in Indonesia Stock Exchange. Sensitivity inflation seen from the beta coefficient (β) inflation of each stock. The formula can be used to calculate the sensitivity of inflation is as follow:

𝑌! = 𝑎 + 𝛽!𝐼𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛 + 𝑒   Source:  Tirapat  and  Nittayagasetwat  (1999)

𝑌!  is  net  profit  after   tax  of   food  and  beverage  company   that   listed   in  Indonesia  Stock  Exchange,  𝛽!  is  inflation  sensitivity.  

Interest Rate

Interest rate is represented by interest rate sensitivity, which is the level of influence the change of interest rate against net profit after tax of food and beverage company that listed in Indonesia Stock Exchange. Sensitivity interest rate seen from the beta coefficient (β) interest rate of each stock. The formula can be used to calculate the sensitivity of interest rate is as follow:

𝑌! = 𝑎 + 𝛽!𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡  𝑅𝑎𝑡𝑒 + 𝑒 Source: Tirapat and Nittayagasetwat (1999)

𝑌! is net profit after tax of food and beverage company that listed in Indonesia Stock Exchange, 𝛽! is interest rate sensitivity.

Net IncomeShareholder's Equity

SalesNet IncomeNet

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Hypothesis Model H1: Return On Equity (ROE), Earning Per Share (EPS), the Net Profit Margin

(NPM), inflation and interest rates simultaneously significant effect on stock prices.

H2a: Return on equity (ROE) has negative significant effect on stock prices to food and beverage companies that listed in the Indonesia stock exchange.

H2b: Earning per share (EPS) has positive significant effect on stock prices to food and beverage companies that listed in the Indonesia stock exchange.

H2c: Net profit margin (NPM) has negative significant effect on stock prices to food and beverage companies that listed in the Indonesia stock exchange.

H2d: Inflation has no effect on stock prices to food and beverage companies that listed in the Indonesia stock exchange.

H2e: Interest rate has negative significant effect on stock prices to food and beverage companies that listed in the Indonesia stock exchange.

H3: Net Profit Margin has dominant effect on stock prices to food and beverage companies that listed in Indonesia stock exchange.

Research Methodology

This purpose of study was to determine the effect of variable Return On Equity (ROE), Net Profit Margin (NPM), Earning per Share (EPS), inflation, and interest rate on the variable stock price by using statistical analysis of the research conducted included in this type of research associative with quantitative approach. Associative research is research that aims to determine the effect nor is the relationship between two or more variables. This research has the highest levels compared with descriptive and comparative due to this research can be constructed a theory that could serve to explain, predict and control the symptom (Sekaran and Bougie, 2013:196).

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Results Analysis 1. Descriptive Statistics

Based  on   the  variables  used   in   this   study,  namely:  Return  On  Equity  (ROE),  Earning  Per  Share  (EPS),  Net  Profit  Margin  (NPM),   inflation,   interest  rate  and  stock  price,  obtained  the  results  of  descriptive  statistics  against  the  research  variables  in  table:

Descriptive Statistics

  N Minimum Maximum Mean Std. Deviation

Return On Equity (ROE) 65 -7.44 143.53 23.3194 29.9067962 Earning Pershare (EPS) 65 -21.27 55576 3377.83 9362.581185 Net Profit Margin (NPM) 65 -2.89 32.88 8.86319 8.90653929 Inflation 65 -7.9431 9.3921 1.62796 2.40709989 Interest rate 65 -8.932 7.8434 1.35612 2.71368853 Stock Price 65 52.5 1118233.33 41789.0231 151733.355 Valid N (listwise) 65        

Information: ROE (X1), EPS (X2), NPM (X3), Inflation (X4), and Interest Rate (X5) 2. Classical Assumption Test

To prove whether the multiple linear regression model used in this research has met the assumptions of classical or not, then the econometrics evaluation is used. Econometric evaluation consists of multicollinearity test, heteroscedasticity test, and autocorrelation test. a. Normality Test

Model Unstandardized Residual Information Kolmogorov-Smirnov Z 1.924 Normal Asymp. Sig. (2-tailed) 0.120 Normal

Based on the Kolmogorov-Smirnov test in table obtained Kolmogorov-Smirnov value is 1.925 and significant (asymptotic significance) is 0.120; where the value is greater than α = 0.05. The assumptions of normality have been met with a value greater than the significance α = 0.05. This means H0 accepted and H1 rejected, so the data are normally distributed residuals. b. Multicollinearity Test

Model   Collinierity  Statistic   Information  Tollerance   VIF  

Return  On  Equity  (X1)  0.855   1.169  

Non-­‐Multikolinieritas  

Earning  Per  Share(X2)   0.880   1.136   Non-­‐Multikolinieritas  Net  Profit  Margin  (X3)   0.769   1.300   Non-­‐Multikolinieritas  

Inflation  (X4)   0.841   1.045   Non-­‐Multikolinieritas  Interest  Rate  (X5)   0.839   1.058   Non-­‐Multikolinieritas  

Based   on   the   test   results,   it   can   be   concluded   that   in   terms   of  multicollenearity,   all   variables   used   in   this   research   do   not   have  multicollenearity.  

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c. Heteroscedascity  Test  

 Based   on   test   results  Heteroscedascity,   it   can   be   seen   that  dots  formed  on  the  scaterplot  chart  do  not   form   a   clear   pattern   and   they   are  scattered  above  and  below  the  number  0   on   the   Y-­‐axis.   Therefore,   it   can   be  concluded   that   the   regression   model  used   in   this   research   is   free   from  Heteroscedascity.   The   result   proves  that   the   influence   of   independent  variables   namely   Return   On   Equity  

(ROE),   Earning   Pershare   (EPS),   Net   Profit   Margin   (NPM),   inflation   and  interest   rate   have   the   same   variant.   Thus,   it   proves   that   the   regression  equation  generated  in  this  research  is  efficient  and  it  generates  appropriate  conclusions. 3. Inferential  Statistical  Analysis    a. F- Test F- TestModel Sum of Squares df Mean Square F Sig.

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Regression 46536875.140 5 9307375.028 3.927 .004b Residual 139839608.922 59 2370162.863    Total 186376484.062 64      Table  shows  the  results  of  multiple  regression  analysis  using  DF1      =  5  

and  DF2  =  59.  It  shows  that  the  F  table  obtained  is  3.340,  while  Fcount  is  3.927  with  a  significance  level  of  0.004.  Based  on  these  results  because  the  level  of  significance  smaller  than  α  (0.05).  From  the  calculation  it  can  be  seen  that  Ho  is   rejected   and   Ha   is   accepted.   Thereby,   it   indicates   that   independent  variables   of   Return   On   Equity   (ROE),   Earning   Per   Share   (EPS),   Net   Profit  Margin  (NPM),  Inflation  and  Interest  Rate  have  significant  effect  on  the  stock  price  of  food  and  beverage  sector  listed  on  Indonesia  Stock  Exchange.    b.  T  -­‐  Test  T  –  Test  Model Unstandardized

Coefficients Standardized Coefficients

t Sig.

B Std. Error Beta

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(Constant) 768.063 1128.844   .680 .499

(ROE 54.364 21.535 .308 2.524 .014 EPS 16.952 8.380 .243 2.023 .048 NPM 46.996 23.383 .258 2.010 .049 Inflation -64.749 99.562 -.115 -2.650 .040 Interest rate -22.748 216.630 -.019 -2.045 .045

The second hypothesis test based on t test, where the test results of the variable ROE produce value T-count equal to 2.524 with a significance level of 0.014, based on these results, because the level of significance smaller than α

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(0.05) then the hypothesis is accepted. The test results of variable EPS produce T-count value of 2.023 with a significance level of 0.048, based on these results, because the level of significance is greater than α (0.05) then the hypothesis is accepted. The test results of variable NPM produce T-count value of 2.010 with a significance level of 0.049, based on these results, because the level of significance is greater than α (0.05) then the hypothesis is accepted. The test results of variable inflation produce T-count value of -2.650 with a significance level of 0.040, based on these results, because the level of significance is greater than α (0.05) then the hypothesis is accepted. The test results of variable interest rate produce T-count value of -2.045 with a significance level of 0.045, based on these results, because the level of significance is greater than α (0.05) then the hypothesis is accepted.

Based on the results of beta coefficient (standardized coefficients) of each variables, the effect of each variables namely ROE is 0.308, EPS is 0.243, NPM is 0.258, inflation is -0.115, and interest rates is -0.19. Based on beta coefficient of each variable, it shows that ROE has the greatest influence on the stock price of food and beverage sector listed on Indonesia stock Exchange.

In addition inferential statistical analysis, calculating the coefficient of determination (R2) to measure how far the ability of model to explain variations in the dependent variable, while the calculation of the coefficient of determination shown in the following table:

R   R  Square   Adjusted  R  Square   Std.  Error  of  the  Estimate  0.500   0.250   0.186   0.024  

The  inferential  statistical  analysis  means  that  the  price  of  shares  in  the  food   and   beverage   sector   listed   on   the   Indonesia   Stock   Exchange,   can   be  explained   approximately   25%   by   the   variable   Return   On   Equity   (ROE),  Earning   Pershare   (EPS),   Net   Profit   Margin   (NPM),   Inflation   and   Interest  Rates,   while   the   remaining   approximately   75%   is   explained   by   other  variables  not   included   in   this  research  model.  The  standard  error    estimate  (SEE)  is  0.024  where  the  results   is  good.  According  to  Imam  Ghozali  (2013:  100),   explaining   that   the   smaller   the   value   of   SEE   will   make   increasingly  price  regression  models  in  predicting  the  dependent  variable.    Discussion 1. Discuss the Simultaneously Effect of Return On Equity (ROE), Earning Per

Share (EPS), Net Profit Margin (NPM), Inflation, and Interest Rate on stock price.

Based on result testing of hypotheses 1, this study was able to prove the effect of simultaneously between return on equity (ROE), earning per share (EPS), net profit margin (NPM), inflation, and interest rate on stock price. These results prove that the stock price are influenced to fundamental factors of micro and fundamental factors of macro. The results simultaneously explained that the company's financial performance as well as environmental companies operate will affect the stock price, specifically described as follows: return on equity, measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested will attract the investors to invest their funds in order to acquire the

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stock price. Earnings per share, as a measurement of the amount of profit that is likely to be distributed to investors as return that affect stock price. Net profit margin, how much of each Indonesian currency (Rupiah) collected by a company as revenue translates into profit effect stock price. Inflation is the rate which the general level of prices for goods and services is rising and, consequently. The purchasing power of currency is falling will affect stock price. The interest rate as the benchmark interest affecting the burden of related issuers that affect stock price. All variables that have been defined significantly effect the stock price.

This study supports the previous research conducted by Sebnem and Bengu (2012), which also proves the simultaneous effect of factors micro fundamentals and macro fundamentals on stock price, study on the Istanbul Stock Exchange (ISE).

2. Discuss the Effect of Return On Equity (ROE), Earning Per Share (EPS), Net Profit Margin (NPM), Inflation, and Interest Rate on stock price. a. ROE on Stock Price

Based on the results of the analysis, it shows that ROE variable has significant positive effect on stock prices. This result indicates that the effectiveness of a company in managing its own capital will increase its stock price. The condition shows that by increasing the company's ability to capitalize its own capital, companies can optimally provide guarantees for the investments made. The change in stock prices are affected by changes in ROE. From the result, investors can use it as a benchmark for the performance of the company and ultimately affects the stock price produced by the company. The profit gained by the company will be used to pay the interest on company’s debt, the preferred stock, and then it is given to the shareholders of common stock. Thus, the higher of ROE is an attempt to maximize the rate of return offered to investors. According to (Brigham and Houston, 2011:100), ROE is often referred to as Return on Common Equity. In Indonesia, the term is often translated as Individual Return on Equity. The Investors who will buy the stocks will be interested in this profitability measurement or part of the total profitability could be allocated to the shareholders.

b. EPS on Stock Price Based on the results of the analysis, it shows that EPS variable has

significant positive effect on stock prices. It is proved that the increase of benefits already earned per share will affect the stock price of the investor. Earning per share, a figure that is often used in publications on the company's performance has been achieved on the performance companies that sell shares to the public because there is a company that has implemented a presumption the earnings per share contains the important information to make predictions regarding the amount of dividend per share in the future in assessing the effectiveness of management. According to Van Horne and Wachowicz (2008: 428-429), EPS is: "A price showing how much profit (Return) is obtained by investors or shareholders per share. The higher value of EPS, the greater the profit available for shareholders ". These results suggest that the increase in the EPS can directly reflect the company's ability to guarantee a profit to investors.

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Based on the analysis, it is proven that the hypothesis stated that EPS has a significant influence on stock price can be accepted. The results showed that the increase in EPS will be followed by the increase in the stock price or vice versa if the EPS decreases, the stock prices will decrease too.

c. NPM on Stock Price Based on the results of the analysis, it shows that NPM variable has

significant positive effect on stock prices. It happens because the ratio is used to measure the extent of the sales generated is able to provide support to generate profits to the maximum, hoping that by increasing sales, the profits earned will also be increased so that the price offered to investors can be increased too. In other words, the higher net profit margin (NPM), the bigger chances for a company to boost the stock price. Van Horne and Wachowicz (2008: 149-150) stated that net profit margin (NPM) is one of the company's profitability analysis. This analysis compares the net profit of the company's operations compared to the operating income of the company. Through net profit margin analysis an investor will get information on how important it is to know what extent the company's ability to generate corporate profits.

d. Inflation on Stock Price The results of data analysis show that inflation variable has significant negative effect on stock prices of food and beverage sector listed on the Indonesian Stock Exchange (IDX). Blanchard and Johnson (2013:20) stated that the increase in inflation is a relatively negative signal for investors in the capital market. According to Macroeconomic Theory (Blanchard and Johnson, 2013:30), it is stated that one of the factors affecting the performance of shares in the Indonesian Stock Exchange (IDX) is the inflation rate. This is because the increase in inflation would raise production costs. If the increasing of the production cost is higher than the increasing in the price of the product, then the company's profitability will be dropped. The macro-economics science focuses on behavior and economic policies that can affect the level of consumption and investment, the balance of trade and payments of a country, important factors affecting changes in prices and wages, fiscal and monetary policy, money supply, interest rates and the amount of government debt at the macro level affecting the achievement of the company's performance. High inflation will directly affect the company's operational activities so the efforts to increase the stock price cannot be avoided. The increasing stock prices were high and the impact on the interest of investors to invest in the company. Thus, the increasing in inflation will negatively impact the efforts to maximize the potential of the company to develop the work done.

e. Interest Rate On Stock Price The results of analysis showed that the rate of Inflation significant negative effect on stock price food and beverage company that listed in Indonesian Stock Exchange (IDX). According to keynes theory, it is explained that investors will look for media investments that have a relatively high rate of return and low risk, or it is often called as the motive of speculation for investors. The transfer of funds by investors from the

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capital market to the deposit would be resulting in massive stock sales that will lead to a decline in stock prices (Mankiw, 2010: 94). There is a negative effect between the interest rate on stock prices that showed that the increasing interest rates investors want to invest safely by doing or save their money in banks (deposit). This condition makes the price of the shares offered to investors will decline which is due to the transfer of funds or the investment made by the investor.

3. Discussion of Return on Equity Variables Effecting Dominant on Stock Prices.

The results of analysis showed that Return On Equity (ROE) has a dominant effect on stock prices. These results indicate that further improve the ability of their own capital in net income it will provide a dominant influence on stock price movements. Brigham and Houston (2011:105) stated that return on equity is a measure of earnings (income) are available for business owners (both common shareholders and preferred shareholders) on the capital that they invested in the company. In general, the higher stock price, the better position of company’s owner.

Practical Implication Companies must maximize efforts to increase sales or operating income of the company consider that the ROE is the dominant variable affecting the stock price. Namely the efforts made by the company's is operational cost efficiency so that the revenue generated can be maximized and will have an impact on the increase in net profit of the company. An increase in net income will be an increase in the ability of private equity-owned to generate net income. To predict stock prices, especially stocks of food and beverage company that list in Indonesian Stock Exchange (IDX), investors should first observe the Return On Equity, Net Profit Margin, Earning Per Share, Inflation, and Interest Rate because of the five variables are jointly capable of affecting the stock price. These effort can be used to minimize the level of losses in investment. The focus can be done in both variables in this study about inflation and interest rates because it has a negative impact on stock prices. The stocks of food and beverage company that list in Indonesian Stock Exchange (IDX) can predict the condition of the company's stock price, so it can take appropriate steps. Conclusion

Based on the results of the research and discussion that has been done previously, there are some conclusions drawn as follow: 1. Return On Equity (ROE), Earning Per Share (EPS), Net Profit Margin

(NPM), inflation and interest rate have simultaneous significant effect on share prices of food and beverage companies listed in Indonesia Stock Exchange.

2. Return On Equity (ROE), Earning Per Share (EPS), Net Profit Margin (NPM), have partial significant positive effect on share prices. Meanwhile, the inflation and interest rate variables have partial significant negative effect on share prices of food and beverage companies listed in Indonesia Stock Exchange.

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3. The variable Return on equity (ROE) dominant effect against stock prices on food and beverage companies that are listed in the Indonesia stock exchange.

Recommendation

Based on the conclusions from the data analysis done, there are some suggestions proposed as follow: 1. For Investor

a. It is expected that the investor always evaluate the company's financial performance. This effort is done to provide support that investment activity undertaken is able to maximize the investments made.

b. It is expected that the investors can determine the choice of stocks to invest so they are always expected to follow the development of the share price offered to investors. The effort is done so that the prospective investors can accurately determine the type of stock used in investing and it can minimize the risk in the future.

2. For Companies For companies, it is expected that they can maximize their operational

performance, so the value of the company can increase and improve. After that attraction of the investors to invest in the company's food and beverage will increase.

3. For further research It is expected for the next researchers to use fundamental and technical

factors. Further researcher are also expected to lengthen the time (period) of the research and need to add more variables, so the results of subsequent research can be more developed.

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