THE ACCURACY OF RELATIVE VALUATION METHODS IN PREDICTING THE OFFER PRICE OF INDONESIAN IPO STOCKS

• Main Author: Ravenza, Rafi
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/83304
• Institution: Institut Teknologi Bandung

The rising trend of IPOs in Indonesia over the years has provided numerous investment options for IPO hunters. The presence of various valuation methods raises questions as different methods yield different valuations. This paper investigates how relative valuation methods can predict IPO offer prices, as these methods are popular and easy to use for investors. The aim of this paper is to determine which relative valuation method yields the most accurate prediction of IPO offer prices. The methods used are price-to-book (P/B), price-to-earnings (P/E), and price-tosales (P/S) ratios. Using companies that conducted IPOs in Indonesia in 2023 and utilizing the average ratios of one year, it was found that the P/B method is the most accurate with an average absolute error of 51.1%. The P/B method also has more moderate absolute errors, making it the most effective for minimizing valuation errors across the industry. In the regression model, the P/B method appears to be the most effective for predicting IPO offer prices, shows the highest adjusted R2 value of 0.781.