THE EFFECT OF PROFITABILITY ON STOCK RETURN

ABSTRACT: This study aims to determine the effect of Return On Assets (ROA), Return On Equity (ROE) andNet Profit Margin (NPM) on stock returns. This research was conducted at manufacturing companies on theIndonesia Stock Exchange (IDX) for the 2017-2019 period. Total population of 105 companies with the methodof determining the sample random sampling obtained a sample of 83 companies. The data collection methodused is non-participant observation method with multiple linear regression data analysis techniques. Based onthe analysis, it is found that ROA, ROE and NPM simultaneously have a significant positive effect on stockreturns. ROA partially has a significant positive effect on stock returns. This shows that the higher the ROA, thehigher the profits the company gets, which causes stock returns to increase and investors are interested ininvesting in manufacturing companies. NPM also partially has a significant positive effect on stock returns. Thisshows that the higher the NPM, the higher the profits obtained by the company on sales, which causes stockreturns to increase and investors are interested in investing in manufacturing companies. ROE has a positive andinsignificant effect on stock returns. which is increasing shows that the company’s performance is getting betterand can potentially increase stock returns. However, ROE did not have a significant effect on stock returnsbecause during the observation period, investors paid less attention to ROE in making their investment decisions.

Keywords: stock return, ROA, ROE, NPM