Revenue Signals, Profitability, and Stock Mispricing: Evidence from Indonesian Technology Firms

Abstract

Main Purpose This study aims to examine the effect of revenue-based valuation on future stock returns and to investigate the moderating role of profitability in Indonesian technology firms. Method This study employs a quantitative approach using panel data regression on 216 firm-quarter observations from 18 technology firms listed on the Indonesia Stock Exchange over the period 2022–2024. A fixed effects model with robust standard errors is applied to control for firm heterogeneity and ensure reliable estimation results. Main Findings The results show that industry-adjusted price-to-sales deviation (PSDEV) has a negative and significant effect on future stock returns (β = −0.183, p < 0.01), indicating the presence of stock mispricing. Profitability is positively associated with future returns, suggesting that firms with stronger operating performance generate superior stock performance. Furthermore, profitability significantly moderates the relationship between valuation deviation and returns, where higher profitability weakens the negative impact of overvaluation. Theory and Practical Implications These findings support asset pricing theory by showing that valuation signals should be interpreted jointly with firm fundamentals rather than in isolation. For investors and practitioners, profitability serves as a credibility signal that can justify higher valuation levels and reduce mispricing risk.Novelty This study introduces an industry-adjusted revenue-based mispricing measure and shows that profitability conditions the relationship between valuation deviation and future stock returns, particularly in technology firms where earnings are less informative.