Stock splits do not change the value of a company. They simply divide the profits among more shares. You can think of a split as a pizza being cut into slices. You still have the same amount of food. It's just easier (and cheaper) to buy one piece.
Nevertheless, stock splits often cause excitement. Companies that split their stock tend to perform well, and the ability to buy more shares of these high-flying companies at more affordable prices is something many investors appreciate.
If you're looking for stock split stocks, here are two of the best on the market right now.
Stock Split Stocks to Buy #1: Walmart
People love a bargain. This is especially true in the current challenging economic climate. With persistently high inflation pushing higher-income consumers to shop for the best deals, Walmart (NYSE:WMT) is gaining market share from its more expensive rivals.
Walmart's shelves are well stocked with affordable groceries and other household essentials. Thanks to the enormous scale of the retail giant, it can command the best prices from suppliers. The company then passes on much of these savings to its customers, driving strong repeat traffic to its more than 10,500 stores.
The discount retailer is also seeing solid growth in its e-commerce business, driven by growing demand for curbside pickup and delivery services. After rising 23% year over year in the quarter ended Jan. 31, Walmart's online sales now account for about 18% of total sales, or more than $100 billion annually.
Advertising is perhaps the company's most exciting growth driver. Walmart saw a 33% increase in its global ad sales in its most recent quarter. To further drive the growth of this high-margin segment, Walmart entered into an acquisition agreement Vizio in February. Vizio's popular smart TVs and SmartCast operating system are expected to bolster Walmart's fast-growing digital advertising offering.
With shares near all-time highs, Walmart decided to reward its shareholders with a 3-to-1 stock split on February 23. With several powerful growth engines driving earnings growth, investors can safely assume that this retail titan's share price will continue to reach new highs in the coming years.
Stock split to buy #2: Chipotle Mexican Grill
Like Walmart, Chipotle Mexican Grill (NYSE: CMG) has created fortunes for the long term shareholders. But don't let that make you the mistake of thinking that this incredible growth story is nearing its end. The beloved restaurant chain still has plenty of room for further expansion.
Chipotle is admired for its high-quality ingredients and responsible sourcing strategies. The company also offers one of the most accelerated and highest-paying career paths in the restaurant industry: Employees can earn as much as $100,000 in annual compensation in just three years.
By appealing to both consumers and job seekers, Chipotle has successfully expanded its store count from a single location in 1993 to more than 3,400 restaurants today. CEO Brian Niccol sees a path to at least 7,000 stores in North America alone. Other international markets also beckon. A few days ago, Chipotle opened its first restaurant in Kuwait.
Importantly, Chipotle's existing locations are becoming increasingly profitable. Comparable restaurant sales rose 7.9% in 2023, driven by traffic increases and price increases. This impressive sales growth has helped push the company's restaurant-level operating margin to 26.2%, up from 23.9% in 2022. Here too, Niccol sees opportunities for increased profits. He believes the burrito chain's average revenue per restaurant could eventually rise to $4 million, up from about $3 million today.
With so much growth still ahead, Chipotle stock remains a great buy today. Furthermore, owning individual stocks is likely to become more affordable this summer. The restaurant leader proposed a stock split of as much as 50-1, pending shareholder approval at the upcoming annual meeting in June. “This is the first stock split in Chipotle's 30-year history and we believe it will make our stock more accessible to both employees and a broader range of investors,” CFO Jack Hartung said in a press release.
If approved, Chipotle's stock split could be one of the largest in the history of the New York Stock Exchange. Buy today and you can benefit from the excitement surrounding this upcoming split. More importantly, if you buy Chipotle stock now, you can claim your share of this proven winner's long-term expansion.
Should You Invest $1,000 in Chipotle Mexican Grill Now?
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Chipotle Mexican Grill and Walmart. The Motley Fool has one disclosure policy.
2 stock splits to buy by hand now was originally published by The Motley Fool
