Stock splits are usually a positive sign that a company (and its stock) is doing well. A spinoff does not change the actual value of an investor’s shares in the company, it simply breaks the holding into smaller pieces. At a lower price, the stock may become more accessible and attractive to a wider range of investors. This also indicates a stock’s success; stock splits often do this because their prices are high.
However, not having a stock split doesn’t necessarily mean the stock is underperforming. costco wholesale (NASDAQ: COST) The company’s stock currently trades around $700. The company could easily split its stock and still get a pretty hefty price tag.
Is Costco likely to undergo a stock split in 2024?
Costco’s last stock split was in 2000
The last time Costco management implemented a stock split was in early 2000, when the warehouse club retailer did a one-for-two stock split. There were several stock splits in the 1990s, but none in more than two decades.
If the company does a stock split this year, the split could be more than 2-for-1, as that would still leave the company’s stock price at a relatively high price of $350. A 7-to-1 split, for example, puts it at around $100. There’s no hard and fast rule as to what the post-split share price should be, but a look at other company spinoffs over the past few years suggests a target of $100 per share. Sharing is welcome.
High share prices don’t mean a spin-off is inevitable
While Costco is one of the highest-priced stocks S&P 500 Indexand there are some higher-priced stocks that didn’t undergo stock splits. Chipotle Mexican BBQ Transactions over $2,300, while homebuilders Network hard drive video recorder Its stock price exceeds $7,400. A high stock price alone is not enough to indicate that a stock split is inevitable. Chipotle Mexican Grill and NVR have never completed stock splits in their history.
Ultimately, it comes down to management and their preferences.Warren Buffett Berkshire Hathaway There are two classes of stock – the original Class A stock, which currently trades at over $550,000 and has never been divided; and the more modest Class B stock, which trades at around $370 and has been split several times since its launch in 1996.But, besides the price, there are Owning stocks makes little real difference.
Why Costco Might Not Split This Year
If Costco were to do a stock split, it would likely do so in 2022, along with a number of other big-name stocks initiating stock splits, including Amazon, letterand Tesla.
That year, Costco’s stock price also reached a high of around $600, and the stock split attracted a lot of attention from investors at the time, and arguably there were even more reasons to do it. Costco’s reluctance to split its stock at the time suggests that I don’t think it will do so anytime soon.
Costco excels where it matters most – profitability
in an era fractional shares Easier to obtain, stock splits don’t matter to investors. What matters is how the business performs, and in Costco’s case, the company’s financials remain impressive. In the most recent quarter (ending November 26, 2023), Costco reported revenue of $57.8 billion, an increase of 6% annually, and profits of approximately $1.6 billion, an increase of 16%.
Costco’s strong customer loyalty and brand make it one of the best growth stocks to buy and hold for the long term. The company has performed well in a variety of economic conditions over the past few years, demonstrating its overall strength and versatility.
While Costco stock isn’t cheap, trading at nearly 50 times its trailing P/E and with continued growth and plenty of opportunities for international expansion, no matter how much higher its stock price is, it’s likely to be a major player in the coming years. A reliable investment. average share price.
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John Mackey is the former CEO of Amazon subsidiary Whole Foods Market and a board member of The Motley Fool; Suzanne Frey is an Alphabet executive and a board member of The Motley Fool. David Jagielski The Motley Fool owns and recommends Alphabet, Amazon, Berkshire Hathaway, Chipotle Mexican Grill, Costco Wholesale, NVR and Tesla. disclosure policy.
Will Costco stock split in 2024? Originally published by The Motley Fool