Crazy! There are stocks whose valuation is up to thousands of times

Jakarta, CNBC Indonesia – Investors, especially those ‘serving’ on the street value investingusually trying to find shares of a company that is projected to shine in the future, but with a valuation that is still cheap at this time alias undervalued.

On the other hand, there are a number of listed shares on the Indonesia Stock Exchange (IDX) which have sky-high valuations (overvalued). Usually, this is due to the euphoria of investors buying up these shares, which makes the share price skyrocket, even though it is not accompanied by a significant increase in profit performance.

Of course, there are many reasons behind the action jor-joran investors ‘mortgage the future’ for the sake of profit or capital gains today which in turn makes the price valuation of a stock ‘to the moon‘.

Call it, for example, because there is story or beautiful narratives related to certain companies that appear at a certain time that fascinate investors without paying much attention to the estimated intrinsic value of their shares.

Below this, CNBC Indonesia Research Team briefly summarizes the 5 stocks with the most expensive valuations in the domestic stock market, especially in terms of the ratio of share price compared to their earnings per share.

To view the valuation ratio CNBC Indonesia Research Team using two methods, namely the price-to-earnings ratio (PER) and price-to-book value (PBV) which are commonly used as fundamental analysis to assess the shares of an issuer.

In simple terms, PER is a valuation method that compares earnings per share with its market price.

The lower the PER, usually the company will also be considered cheaper, For PER usually generally rule of thumb will be considered cheap if this ratio is below 10 times. However, it is also necessary to compare it with the average PER of similar industries.

Meanwhile, PBV is a valuation method that compares the book value of an issuer with its market price.

The lower the PBV, usually the company will be judged to be cheaper. As a rule of thumb, PBV will be considered cheap if the ratio is below 1 time.

Like PER, the PBV ratio of an issuer’s stock also needs to be compared with the average PBV of similar industries.

5 Most Valuable Stocks

Source: IDX, Refinitiv |Share price as of April 13, 2022

If you look at the data above, the five stocks come from diverse sectors, starting from consumer non-cyclicalstechnology, energy, to, financial services.

Investors See the Giant Behind PANI

In the first position, there are shares of the issuer of canned producers PANI with a very high PER value, which is 1,246.81 times. In simple terms, this indicates that an investor is willing to spend IDR 1,247 for every IDR 1 of the company’s current earnings per share.

Apart from being far above rule of thumb, Compared to industry PER of 122.62 times, PANI’s PER also seems to be on ‘another planet’.

Actually, if you want to look at it historically, the reason PANI’s share PER has skyrocketed occurred along with the official news that the majority of PANI’s shares or 80% of the shares were annexed by PT Multi Artha Pratama, part of the ‘giant’ of Indonesian property, the Agung Sedayu Group, in early October 2021.

Long story short, after all year PANI’s share price was in the range of Rp 100 – Rp 300/share, it suddenly jumped starting on October 8, 2021. At that time, PANI’s shares had jumped and touched the upper auto rejection (ARA) limit of 25% as much as 6 days in a row.

The sudden spike caused the stock exchange to suspend trading in PANI’s shares.

Despite having experienced a massive sell-off as investors ‘disbursed their money’, PANI shares were still able to score extraordinary daily gains after that, including during 18-25 February 2022 (with a total price jump of 125.6%).

–