THE EFFECT OF LIQUIDITY AND PROFITABILITY RATIO ON ENERGY SUB-SECTOR STOCK PRICES ON THE INDONESIAN STOCK EXCHANGE

Abstract

This study examines the effect of liquidity ratios and profitability ratios on stock prices in the energy sub-sector listed on the Indonesia Stock Exchange during the period 2023–2024. Using a quantitative and causal-associative approach, this study analyzes the influence of the Current Ratio (CR) as a measure of liquidity and Return on Equity (ROE) as an indicator of profitability on the average annual stock price. The sample consists of companies in the energy sub-sector selected through purposive sampling, with data collected from annual financial reports and official stock price records. Data analysis was conducted using WarpPLS 7.0, including descriptive statistics, construct validity and reliability tests, multicollinearity checks, and structural model evaluation. The results indicate that the Current Ratio does not have a significant impact on stock prices, suggesting that liquidity is not a primary consideration for investors in this sector. Conversely, Return on Equity exhibits a significant positive effect on stock prices, highlighting profitability as the primary driver of investor interest and stock price appreciation in the energy subsector. This model explains approximately 59.5% of stock price variation, confirming the substantial explanatory power of the selected financial ratios. These findings provide valuable insights for investors and corporate management in formulating investment strategies and financial policies to enhance corporate value.