STOCK VALUATION USING FREE CASH FLOW TO EQUITY (FCFE) AND PRICE EARNING RATIO (PER)

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1 STOCK VALUATION USING FREE CASH FLOW TO EQUITY (FCFE) AND PRICE EARNING RATIO (PER) (Study at Companies Listed on LQ-45 Index in Indonesia Stock Exchange Period August January 2018) Rani Rachmawati Nila Firdausi Nuzula Faculty of Administrative Science Brawijaya University Malang ranirachma18@gmail.com ABSTRAK Valuasi saham adalah salah satu hal penting dalam berinvestasi. Tujuan dari valuasi saham adalah untuk membantu investor meminimalkan risiko investasi melalui nilai intrinsik dalam membuat keputusan investasi. Model evaluasi untuk menghitung nilai intrinsik dalam penelitian ini adalah analisis fundamental dengan Free Cash Flow to Equity (FCFE) dan Price Earning Ratio (PER). Penelitian ini menggunakan penelitian deskriptif dengan menggunakan populasi penelitian pada perusahaan yang terdaftar pada Indeks LQ-45 di Bursa Efek Indonesia periode Agustus Januari 2018, yang terdiri dari 45 perusahaan. Peneliti menggunakan teknik purposive samplingdan menghasilkan 18 perusahaan sebagai sample. Hasil menggunakan pendekatan Free Cash Flow to Equity (FCFE) menunjukkan bahwa 9 perusahaan dalam kondisi undervalued dan 9 perusahaan dalam kondisi overvalued. Sementara, hasil menggunakan pendekatan Price Earning Ratio (PER) menunjukkan bahwa hanya 4 perusahaan dalam kondisi undervalued dan 14 perusahaan dalam kondisi overvalued. Rekomendasi keputusan investasi dapat diambil untuk perusahaan dalam kondisi undervalued adalah membeli atau menyimpan saham dan rekomendasi keputusan investasi untuk perusahaan dalam kondisi overvalued adalah menjual saham. Ada beberapa perusahaan yang memiliki rekomendasi serupa untuk keputusan investasi dari kedua pendekatan tersebut, yaitu AKRA, BBCA, BBRI, BMRI, KLBF, PTBA, UNTR, dan UNVR. Kata Kunci :Valuasi Saham, FCFE, PER. ABSTRACT Stock Valuation is one important thing in investing. The aim is to help investors to minimize the risk of investment through intrinsic value in making investment decisions. The evaluation model for calculate the intrinsic value is fundamental analysis with Free Cash Flow to Equity (FCFE) and Price Earning Ratio (PER). This research uses descriptive study using research population on companies which listed on the LQ-45 Index in Indonesia Stock Exchange period August 2017 January 2018, it consist of 45 companies. Researcher using purposive sampling technique that was selected 18 companies. The results using Free Cash Flow to Equity (FCFE) approach indicates that 9 companies in undervalued condition and 9 companies in overvalued condition. While, the results using Price Earning Ratio (PER) approach shows that only 4 companies in undervalued condition and 14 companies in overvalued condition. The recommendation of investment decision can be taken for companies in undervalued condition is to buy or keep the stock and the recommendation of investment decision for companies in overvalued condition is sell the stock. There are several companies that have similar recommendation of investment decision between both approach, those are AKRA, BBCA, BBRI, BMRI, KLBF, PTBA,UNTR, and UNVR. Keywords : Stock Valuation, FCFE, PER. Jurnal Administrasi Bisnis (JAB) Vol April

2 I. BACKGROUND The current growing economy will encourage companies to raise funds in financing all sorts of activities. This financing will result in changes in the capital structure of the business entity. There are two main alternatives financing. The first is acquisition of new debt or the capital increase and the other financing is by selling stocks or ownership of a business entity. Financing by selling stocks or ownership of business entity can be done by companies that have been go public. Go public is an activity of offering stocks or other securities by issuers to the public. This activity is conducted based on the procedures governed by Capital Market Law and the Implementation Ordinance (Sunariyah, 2006:32). The companies have to be listed on the capital market to offer their securities, so investor can do investment activities related with their securities. In investing activity, investor has a variety option to choose financial instrument in capital market such as stock and bond. Investors who want to play safe (risk averse) usually tend to invest their money to choose bond with certain return. It is different with investor who interest challenges (risk taker), they usually tend to choose invest in common stock. Investor's interest to do investing activity has increased especially in stock. Stock is one of the most popular instruments in the capital market. Investing in stock will get profit such as dividend and income from the difference between the selling price of stocks and the purchase price (capital gain). However, investing in stock contains high risk and it is kind of challenge for investors. Investors believe that the higher risk will provide higher profit as well. It is called high risk high return, high return will be followed by high risk too (Tandelilin, 2010:9). One of the ways that can help Investor to reduces or minimize the risk of investment is by doing stock valuation. Beside reduces the risk, investor also can determine the position of stock. It is help in making decision of investment. So, investor can avoid loss and optimize return of investment. The purpose of valuation is to determine the intrinsic value of the stock. The intrinsic value is the true value, this value reflects the actual stock price of the traded stock (Jogiyanto, 2014:160).This value will help in taking the decision to buy or sell or save the stock. There are two analysis that are widely used to determine the actual value of stock, that is fundamental analysis and technical analysis (Jogiyanto, 2014:160). Besides that, there are several approach in stock valuation. According to Husnan (2003:280) explain two models of stock valuation, those are Present Value Approach and Price Earning Ratio (PER) Approach. According to Damodaran (2002:11) there are three approaches to valuation, those are Discounted Cash Flow (DFC) valuation (include Free Cash Flow to Equity (FCFE) and Free Cash Flow to Firm (FCFF)), relative valuation contingent claim valuation. This research will use fundamental analysis. Focus of this research is using Free Cash Flow to Equity (FCFE) and Price Earning Ratio (PER) approaches in stock valuation methods. FCFE used is FCFE with constant growth model. FCFE approach is a measure of how much cash can be paid by company to the equity stockholders of a company after all expenses, reinvestment and debt are paid (investopedia.com), and constant growth model is used to value firms at the stable growth rate (Damodaran, 2002:359). This approach is chosen because it is a appropriate approach that capture the true capacity to generate cash flows for stockholder and it has accurate indicators in calculating cash flow received by stockholder. Besides that, the constant growth is chosen because the companies that will be valued is indicated have stable growth. While, PER approach is the approach that try to estimate stock value by multiplying earning per share (EPS) by certain multiples (Husnan, 2003:280). This is chosen because PER is an indicator of market confidence in the company's growth prospects and it is the one of popular approaches used among stock analysts and practitioners. This research will be conducted on companies stocks list in the LQ-45 index because this index is 45 the most actively stocks traded. Stocks selected based on the trading liquidity and market capitalization (Jogiyanto, 2014:130). Liquidity of stock is determined by selling and buying transaction in capital market. The high liquidity of stocks, indicate how often the transactions occur on the stocks. Thus, it means that the stocks in this index have high demand from investors. Based on this situation, the company's stock LQ- Jurnal Administrasi Bisnis (JAB) Vol April

3 45 index becomes the object of research related to stock valuation. Based on the background above, this research entitled Stock Valuation using Free Cash Flow to Equity (FCFE) and Price Earning Ratio (PER) (Study at Companies Stocks listed on LQ-45 Index in Indonesia Stock Exchange period August 2017 January 2018). II. LITERATURE REVIEW A. Capital Market Capital market is a market of long-term financial instrument, such as debt, stock, derivatives instrument and others (Darmadji, 2008:1). According to Sunariyah (2003:4) capital market in general is an organized financial system. Commercial banks, all intermediary institutions in the finance field and overall securities include in there. While in a narrow sense, the capital market is a place to trade stocks, obligations, and others securities using the services of securities brokers. B. Investment An investment is the commitment of funds or invests the capital to one or more assets that will be held over some future time period. It is refers to investing more in assets or it is not only one asset (Jones, 2000:3). The people who did investment activities are investor. Investor divided into two, there are individual investors and institutional investors. Individual investors consist of individual that do investment activities, while institutional investors consist of companies that do investment activities (Tandelilin, 2010:2). C. Stock Stock is an instrument that indicates an individual or institution enclose their capital in a company (Nasarudin, 2004:188). According to Sunariyah, (2003:30) stock are equity participation in the ownership of issuer. The ownership of the stock is mean that the ownership of company part. If the investor buys stock of a company, the investor will be one of company owners. D. Stock Price Valuation In making investment decisions, investors need to make a valuation of the stocks to be selected for proper investment decisions and generate the return as expected. Stock valuation conducted to produce information in the form of intrinsic value. The intrinsic value of the stock will be compared with the stock market price to determine the position of sale or purchase of a company's stock. Calculating intrinsic value or the actual stock price is to avoiding loss and obtained a satisfactory profit. Calculation model is a mechanism to calculate company variables such as sales, profit and dividend to be an estimate of stock prices (Halim, 2015:4). Several analysis in intrinsic value calculation as follows: 1. Technical analysis Technical analysis is an analytical technique that uses market data such as demand and supply of the stock (Sunariyah, 2003:152). 2. Fundamental analysis Fundamental analysis is the analysis of stock s value that use basic data such as earning, sales and risk (Jones, 2000:303). In conducting stock valuation, there are several approaches of valuation which already explained by experts. 1. Discounted Cash Flow (DFC) a. Free Cash Flow to Firm (FCFF) Free Cash Flow to Firm (FCFF) is the cash flow after tax accumulated from business activities of the company, minus capital investment and net working capital (Bodie, 2014:301). Source: Bodie (2014:301) b. Free Cash Flow to Equity (FCFE) Free Cash Flow to Equity (FCFE) is the cash flow left over after meeting all financial obligations, including debt payments, and after covering capital expenditure and working capital needs (Damodaran, 2002:351). Source: Damodaran, 2002 :252) There are several growth models in this approach. R f = Risk-free rate of return Jurnal Administrasi Bisnis (JAB) Vol April

4 R f (SBI)= Average of interest rate of SBI N = Number of month in a year. a. Rate of individual stock return (R i ) Source: Jogiyanto (2014:237) R i,t = Rate of individual stock return in t time (month) P t = Current stock price (closing price) P t 1 = Previous stock price (closing price) D t = Dividend in t time (month) b. Rate of market return (R M ) Souce: Jogiyanto (2014:370) R M,t = Rate of market return in t time (month) IHSG t = Current composite stock price index IHSG t 1 = Previous composite stock price index c. Beta (β ) Source: Tandelilin (2010:195) or Source: Jogiyanto (2012:383) β i = Beta σ i,m = Covariance of securities return and market return σ 2 M = Variance of market return R it = Rate of individual stock return R it = Average rate of individual stock return R Mt = Rate of market return R Mt = Average rate of market return d. Cost of Equity (Ke) Source: Tandelilin (2010:197) Ke = Cost of equity E(R M ) = Expected market portfolio Return βi = Beta R f = Risk-free rate of return e. Growth rate (g) Source: Tandelilin (2010:315) f. Free Cash Flow to Equity (FCFE) Source: Damodaran, 2002 :252 g. Expected Free Cash Flow to Equity (FCFE 1 ) Source: Gardner, McGowan, and Moeller (2012:3) h. Intrinsic value (Constant Growth FCFE approach) Source: Damodaran (2002:359) i. Investment decision 1) Intrinsic value > market price = undervalued. The decision is buy the stock or save it. 2) Intrinsic value < market price = overvalued. The decision is sell the stock. 3) Intrinsic value = market price, the decision can be sell or buy or save depend on the investor condition. 1. Price Earning Ratio (PER) Approach a. Calculate growth rate (g) Source: Tandelilin (2010:315) b. Calculate Earning per share (EPS) estimation Jurnal Administrasi Bisnis (JAB) Vol April

5 Source: Tambunan (2007:248) E 1 = EPS estimation (2016) E 0 = EPS previous year (2015) g = Growth rate of the company c. Calculate Dividend per share (DPS) estimation Source: Tambunan (2007:230) D 1 = DPS estimation (2016) D 0 = DPS previous year (2015) g = Growth rate of the company d. Calculate Expected return (k) Source: Brigham and Houston (2010:394) k = Expected return D 1 = DPS estimation (2016) Po= Market price of stock (closing price 2016) g = Growth rate of the company e. Calculate Price Earning Ratio (PER) estimation Source: Tandelilin (2010:376) f. Calculate intrinsic value (PER approach) Source: Tandelilin(2010:377) j. Investment decision 1) Intrinsic value > market price = undervalued. The decision is buy the stock or save it. 2) Intrinsic value < market price = overvalued. The decision is sell the stock. 3) Intrinsic value = market price, the decision can be sell or buy or save depend on the investor condition. IV. RESULT AND DISCUSSION 1. Free Cash Flow to Equity (FCFE) Approach a. Calculate risk-free rate of return (R f ) The calculation of risk-free rate of return is represented by interest rate of Bank Indonesia Certificate (SBI). Based on the analysis, mostly the fluctuation of risk-free rate in Indonesia period are changing about 0,25%. The calculation of risk-free rate of return period is as follows: R f = R f (SBI) = N 12 = 0, R f = Risk-free rate of return R f (SBI)= Average of interest rate of SBI N = Number of month in a year The value of risk-free rate of return period is 0, b. Rate of individual stock return (R i ) Table 1 Rate of individual stock return (R i ) period R i 1 ADRO -0, ICBP 0, AKRA 0, INDF 0, ASII -0, INTP 0, BBCA 0, KLBF 0, BBNI 0, LSIP 0, BBRI 0, PTBA -0, BMRI 0, SMGR -0, BSDE 0, UNTR 0, GGRM 0, UNVR 0,01756 The table shows from 18 companies, AKRA is the company that has the highest value. The value of AKRA reaches 0, While, the lowest value of the rate of individual stock return is ADRO with the value of -0, a. Rate of market return (R M ) Market return is the rate of return based on the stock price index development or Index Harga Harga Saham Gabungan (IHSG). Rate of market return (R M ) period is obtained from the total R M divided by the total months in 3 years. The calculation of Rate of market return (R M ) period is as follows: R M = 0,05937 = 0, R i Jurnal Administrasi Bisnis (JAB) Vol April

6 The rate of market return (R M ) period is 0, b. Beta (β) Table 2 Beta (β) of the companies 1 ADRO β i -0, ICBP β i 1, AKRA 0, INDF 0, ASII 1, INTP 1, BBCA 0, KLBF 0, BBNI 1, LSIP 0, BBRI 1, PTBA 0, BMRI 0, SMGR 1, BSDE 2, UNTR 0, GGRM 0, UNVR 0,40012 Based on the Table 4.5, the results of the calculation show that the highest beta is BSDE with the value of 2, While, the lowest value of beta is -0,01926 owned by ADRO. There are 7 companies have beta more than 1 (β>1) and 11 companies have low risk or beta more less than 1 (β<1). c. Cost of Equity (Ke) Table 3 Cost of equity (Ke) period ADRO Ke 0, ICBP Ke 0, AKRA 0, INDF 0, ASII 0, INTP 0, BBCA 0, KLBF 0, BBNI -0, LSIP 0, BBRI 0, PTBA 0, BMRI 0, SMGR -0, BSDE -0, UNTR 0, GGRM 0, UNVR 0, Based on the table, it is known that the stock of PT. Adaro Energy Tbk. (ADRO) has the highest cost of equity (Ke) than the other stocks. While, the lowest value is owned by PT. Bumi Serpong Damai Tbk. (BSDE). The result is different from the common theory that the higher beta will provide higher return too. d. Growth rate (g) Table 4 Growth rate of the companies period ADRO g (%) 3,414% 7 BMRI g (%) 14,004% 2 AKRA 5,465% 8 BSDE 16,682% 3 ASII 9,264% 9 GGRM 7,075% 4 BBCA 16,483% 10 ICBP 8,688% 5 BBNI 11,775% 11 INDF 5,023% 6 BBRI 16,316% 12 INTP 6,817% Continued Table 4 g (%) g (%) 13 KLBF 11,833% 16 SMGR 12,259% 14 LSIP 2,336% 17 UNTR 4,349% 15 PTBA 13,210% 18 UNVR 23,526% The table shows the result of growth rate calculation period on the 18 sample companies. There are 9 companies generate growth rate more than 10%. The highest owned by UNVR, the growth rate reaches 0,23526 or 23,526%. While, LSIP only has growth rate of 0,02336 or 2,336% and it become the lowest. e. Free Cash Flow to Equity (FCFE) Table 5 Free Cash Flow to Equity (FCFE) period 2015 FCFE 2015 (Rupiah) 1 ADRO ,00 2 AKRA ,00 3 ASII ,00 4 BBCA ,00 5 BBNI ,00 6 BBRI ,00 7 BMRI ,00 8 BSDE GGRM ,00 10 ICBP ,00 11 INDF ,00 12 INTP ,00 13 KLBF ,00 14 LSIP ,00 15 PTBA ,00 16 SMGR ,00 17 UNTR ,00 18 UNVR ,00 a. Expected Free Cash Flow to Equity (FCFE 1 ) Table 6 Expected Free Cash Flow to Equity (FCFE 1 ) period 2016 FCFE 2016 (Rupiah) 1 ADRO ,00 2 AKRA ,70 3 ASII ,00 4 BBCA ,00 5 BBNI ,00 6 BBRI ,00 7 BMRI ,00 8 BSDE Continued Table 6 FCFE 2016 (Rupiah) 9 GGRM ,00 10 ICBP ,00 11 INDF ,00 Jurnal Administrasi Bisnis (JAB) Vol April

7 12 INTP ,00 13 KLBF LSIP ,00 15 PTBA ,00 16 SMGR UNTR UNVR ,00 b. Intrinsic value (Constant Growth FCFE approach) Table 7 Expected intrinsic value of the companies period 2016 Expected Intrinsic Value in 2016 (Rupiah) Full amount Per share 1 ADRO , ,05 2 AKRA , ,85 3 ASII , ,04 4 BBCA , ,51 5 BBNI , ,45 6 BBRI , ,02 7 BMRI , ,04 8 BSDE , ,13 9 GGRM , ,90 10 ICBP , ,65 11 INDF , ,06 12 INTP , ,51 13 KLBF ,60 763,33 14 LSIP , ,77 15 PTBA , ,12 16 SMGR , ,94 17 UNTR , ,11 18 UNVR , ,85 c. Investment decision The types of condition to determine investment decision are undervalued or overvalued condition. Undervalued condition occurs when market price is lower than the intrinsic price, while overvalued condition of stock occurs market price is higher than the intrinsic price. Table 8 Recommendation of investment decision using FCFE approach Investment Condition Decision 1 ADRO Undervalued Buy/keep 2 AKRA Undervalued Buy/keep 3 ASII Undervalued Buy/keep 4 BBCA Overvalued Sell 5 BBNI Undervalued Buy/keep 6 BBRI Overvalued Sell 7 BMRI Overvalued Sell 8 BSDE Overvalued Sell 9 GGRM Undervalued Buy/keep 10 ICBP Undervalued Buy/keep 11 INDF Undervalued Buy/keep 12 INTP Overvalued Sell 13 KLBF Overvalued Sell 14 LSIP Undervalued Buy/keep 15 PTBA Overvalued Sell 16 SMGR Undervalued Buy/keep 17 UNTR Overvalued Sell 18 UNVR Overvalued Sell Based on the table above, there are 9 companies undervalued and 9 companies overvalued. Recommendation of investment decision to undervalued stock is buy or keep the stock and for overvalued stock is sell the stock. 2. Price Earning Ratio (PER) Approach a. Calculate growth rate (g) Table 9 Growth rate g (%) g (%) 1 ADRO 3,414% 10 ICBP 8,688% 2 AKRA 5,465% 11 INDF 5,023% 3 ASII 9,264% 12 INTP 6,817% 4 BBCA 16,483% 13 KLBF 11,833% 5 BBNI 11,775% 14 LSIP 2,336% 6 BBRI 16,316% 15 PTBA 13,210% 7 BMRI 14,004% 16 SMGR 12,259% 8 BSDE 16,682% 17 UNTR 4,349% 9 GGRM 7,075% 18 UNVR 23,526% b. Calculate Earning per share (EPS) estimation Table 10 Estimated EPS 2016 E 2016 (Rp) E 2016 (Rp) 1 ADRO 67,98 8 BSDE 142,55 2 AKRA 276,70 9 GGRM 3.581,42 3 ASII 390,41 10 ICBP 559,33 4 BBCA 851,29 11 INDF 355,00 5 BBNI 523,31 12 INTP 1.264,16 6 BBRI 1.207,80 13 KLBF 47,82 7 BMRI 993,54 14 LSIP 93,49 8 PTBA 1.000,31 17 UNTR 1.078,00 9 SMGR 855,73 18 UNVR 947,38 Based on the Table 10, it shows the highest EPS estimation from 18 samples is GGRM. The value of EPS estimation of GGRM is Rp ,42. While, the lowest is KLBF with the value of Rp. 47,82. Jurnal Administrasi Bisnis (JAB) Vol April

8 c. Calculate Dividend per share (DPS) estimation Table 11 Estimated DPS 2016 D 2016 (Rp) D 2016 (Rp) 1 ADRO 33,92 10 ICBP 278,24 2 AKRA 126,56 11 INDF 176,44 3 ASII 193,40 12 INTP 443,29 4 BBCA 64,07 13 KLBF 21,25 5 BBNI 136,96 14 LSIP 37,86 6 BBRI 365,63 15 PTBA 328,00 7 BMRI 298,06 16 SMGR 342,29 8 BSDE 5,83 17 UNTR 721,05 9 GGRM 2.783,95 18 UNVR 946,21 The table shows that GGRM is the company that gives the highest dividend per share than the others. The DPS estimation reaches Rp ,95 per share. While, the lowest of DPS estimation is BSDE that only reaches Rp. 5,83 per share. d. Calculate Expected return (k) Table 12 Expected return (k) 2016 k 1 ADRO 0, ICBP 0, AKRA 0, INDF 0, ASII 0, INTP 0, BBCA 0, KLBF 0, BBNI 0, LSIP 0, BBRI 0, PTBA 0, BMRI 0, SMGR 0, BSDE 0, UNTR 0, GGRM 0, UNVR 0,26083 The table shows that from the 23 samples the lowest expected return owned by INTP. While, the higher owned by UNVR. The calculation of expected return in PER is different with expected return or cost of equity in FCFE approach. e. Price Earning Ratio (PER) Table 13 Estimated PER 2016 PER k PER 1 ADRO 7,58 10 ICBP 12,05 2 AKRA 25,93 11 INDF 15,99 3 ASII 15,37 12 INTP 17,66 4 BBCA 15,61 13 KLBF 27,60 5 BBNI 9,53 14 LSIP 14,63 6 BBRI 9,46 15 PTBA 4,52 7 BMRI 9,31 16 SMGR 13,32 8 BSDE 12,62 17 UNTR 15,72 9 GGRM 15,36 18 UNVR 39,06 Based on the table above, it shows UNVR is the company that has highest value of PER and the lowest value owned by PTBA In general, PER is generated from earnings per share compared to the stock price. If the value PER is low, it is caused by relatively high earnings per share compared to the stock price. Thus, low value of PER is one of the main considerations for investing in addition to other factors. f. Intrinsic value (PER approach) Table 14 Expected intrinsic value using PER approach in period 2016 Intrinsic value Intrinsic value 1 ADRO 515,29 10 ICBP 6.739,93 2 AKRA 7.174,83 11 INDF 5.676,45 3 ASII 6.000,60 12 INTP ,07 4 BBCA ,64 13 KLBF 1.319,83 5 BBNI 4.987,14 14 LSIP 1.367,76 6 BBRI ,79 15 PTBA 4.521,40 7 BMRI 9.249,86 16 SMGR ,32 8 BSDE 1.798,98 17 UNTR ,16 9 GGRM ,61 18 UNVR ,66, The table shows the expected intrinsic value of 18 sample companies in period The highest expected intrinsic value 2016 is owned by GGRM and the value reached ,61. While, ADRO is the lowest value with the value of 515,29. g. Investment decision The way to determine investment decision is using condition of the stock, that is similar with the determination in FCFE approach. The types of condition to determine investment decision are undervalued or overvalued condition. Undervalued condition occurs when market price is lower than the intrinsic price, while overvalued condition of stock occurs market price is higher than the intrinsic price. Table 15 Recommendation of investment decision using PER approach Condition 1 ADRO Overvalued Sell Investment Decision 2 AKRA Undervalued Buy/keep 3 ASII Overvalued Sell 4 BBCA Overvalued Sell 5 BBNI Overvalued Sell 6 BBRI Overvalued Sell 7 BMRI Overvalued Sell 8 BSDE Undervalued Buy/keep Jurnal Administrasi Bisnis (JAB) Vol April

9 9 GGRM Overvalued Sell 10 ICBP Overvalued Sell 11 INDF Overvalued Sell 12 INTP Undervalued Buy/keep 13 KLBF Overvalued Sell 14 LSIP Overvalued Sell 15 PTBA Overvalued Sell 16 SMGR Undervalued Buy/keep 17 UNTR Overvalued Sell 18 UNVR Overvalued Sell Based on the table above, there are 4 companies undervalued and 14 companies overvalued. The result is pretty different with investment decision using FCFE approach. 3. Interpretation The recommendation of investment decision using FCFE and PER approach has much difference. There are only 8 companies stocks that have similar recommendation of investment decision, those are AKRA, BBCA, BBRI, BMRI, KLBF, PTBA, UNTR and UNVR. The difference occurred because FCFE and PER approach have different perspective in valuing stock. Either the recommendation of investment decision from the FCFE or PER approach is used depends on the investors themselves. Each investor has a different perspective in valuing stocks from others. In this discussion, they tend to value stocks through available cash flow to equity (FCFE approach) or earning and market price of stock (PER approach). V. CONCLUSION AND SUGGESTION 1. CONCLUSION Based on the analyzing process, this analysis concludes that: a. The results of the beta calculation and cost of equity in the FCFE approach different from the common theory. This difference is due to the value of the risk-free rate of return in the research period is higher than the rate of market return. Thus, investment's interest in investment with zero risk is higher than investment with risk. b. The result of stock valuation using FCFE with constant growth model, there are 9 undervalued companies and 9 overvalued companies. c. From the condition of the stock, the recommendation of investment decision for 9 undervalued companies is buy or keep the stocks. It is expected that investors can gain more profit. While, the recommendation of investment decision of overvalued position is sell the stock. Investors better to sell the stocks because it is considered to expensive. d. The result stock valuation using PER approach, there are only 4 undervalued companies from 18 companies. The companies that have intrinsic value higher than market value or usually called overvalued are 14 companies. e. The recommendation of investment decision that investor can take based on the result of PER approach is investor can buy or keep the stock of 4 undervalued companies. That companies consist of AKRA, BSDE, INTP and SMGR. The others companies are the overvalued companies. Thus, investor can take the decision to sell the stocks. f. There are several companies that have similar stock position and recommendation of investment decision between FCFE and PER approach. Those are AKRA, BBCA, BBRI, BMRI, KLBF, PTBA, UNTR, and UNVR 2. SUGGESTION a. For investor, it would be better if the investors implement both of FCFE and PER approach in order to generate the best recommendation of investment decision. PER and FCFE have different indicator in generating intrinsic value. Thus, if the investors implement both approaches, it expected to be more profitable decision. b. For the next researchers who interested in stock valuation, either FCFE or PER is the commonly approach used in valuing stock prices. But in calculation of FCFE, there are several growth models. It would be great for the next researcher to do stock valuation with different growth models, such as two stage discounted FCFE model or a threestage FCFE model. REFERENCES Bodie, zvi. Kane, Alex. Markus Alan J Manajemen Portofolio dan Investasi. Jakarta: Salemba Empat. Brigham, Eugne F. and Huston, F.Joel Dasar-dasar Manajemen Keuangan. Edisi ke sebelas. Jakarta: Salemba Empat. Jurnal Administrasi Bisnis (JAB) Vol April

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