Analysing performance using the financial ratio is challenging for many investors and researchers. The purpose of this study is to evaluate efficiency performance of decision-making units (DMUs) which is stocks company of using production frontier-based and accounting-based approaches. Thus, the data envelopment analysis (DEA) models and DuPont analysis were applied. Specifically, DuPont analysis was utilized to evaluate three different aspects: profitability, the efficiency of assets utilization and financial leverage. The return on equity (ROE) was calculated to rank the companies’ performance. Meanwhile, the estimation method of DEA computed the efficiency scores and ranked the companies accordingly based on the ROE, return on assets, earnings per share, net profit margin, price to earnings ratio, debt to equity ratio and asset turnover. The major results showed that DMUs (company) gave different picture performance rankings with different approaches. The finding also revealed that the results from DEA method, gave more comprehensive analysis in term of efficiency measurement, whereas DuPont presented good analysis because it provided information for investors if the highest return is the main objective for them. Additionally, the analysis also provided an indication whether a company can earn a higher return if it generates a high net profit margin; if it uses its assets effectively to generate more sales and if it has a high financial leverage.
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In-Text Citation: (Arsad et al., 2022)
To Cite this Article: Arsad, R., Isa, Z., Abidin, N. H. Z., & Shaari, S. N. M. (2022). Stock Selection using the Data Envelopment Analysis Models and DuPont Analysis. International Journal of Academic Research in Business and Social Sciences, 12(8), 1702– 1718.
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