This Company Just Announced a Historic Split: Time to Buy?
Many stock splits have occurred in recent years, with companies aiming to increase liquidity within shares and erase barriers to entry for potential investors. Lower share prices are more affordable for a greater portion of investors, although it’s worth noting that the rise of fractional share investing has alleviated this issue for some.
Of course, stock splits are purely cosmetic changes that do not affect the company's valuation or financial health.
Recently, beloved Chipotle Mexican Grill CMG announced a historic 50-for-1 split, with shares seeing a nice pop following the announcement. Let’s take a closer look at how the company currently stacks up and other examples of recent splits.
Chipotle Mexican Grill
Chipotle Mexican Grill operates quick-casual and fresh Mexican restaurant chains. It’s the first split in the company’s history, hoping to make shares more accessible to employees as well as a broader range of investors. Shares are expected to begin trading on a post-split basis on Wednesday, June 26th, 2024.
The company’s sales growth has been spectacular, with CMG posting double-digit percentage annual sales growth in back-to-back years.
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CMG shares have been in a league of their own over the last year, gaining nearly 80% and widely outperforming relative to the general market. The company’s strong growth has supported the robust share performance, with estimates for its current fiscal year (FY24) suggesting 18% earnings growth on 13% higher sales.
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The company is coming off a strong FY23, opening a record number of new restaurants and establishing its first international partnership. Margin expansion was also prevalent, with CMG’s operating margin moving to 15.8% from 13.4%.
Chipotle Mexican Grill is currently a Zacks Rank #3 (Hold). It’s worth noting that analysts have maintained a rosy outlook for its FY24, with the $53.11 Zacks Consensus EPS estimate up 5% over the last year (+18% Y/Y growth).
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Walmart
Retail giant Walmart WMT recently underwent a 3-for-1 split, with shares trading on a split-adjusted basis starting on February 26th and reflecting the first split since 1999. Analysts have been bullish regarding its current fiscal year (FY25), with the $2.36 Zacks Consensus EPS estimate up nearly 6% over the last year.
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Shares have added +3.6% in value since the split date, outperforming the S&P 500 just marginally.
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