Stock splits are popular once again. In June, Nvidia (NASDAQ:NVDA) split its stock on a 10-for-1 basis and Chipotle Mexican Grill (NYSE:CMG) executed a 50-for-1 split, the first in the restaurant chain’s history. Even Walmart (NYSE:WMT) split its stock on a 3-for-1 basis earlier this year.
Other companies that have announced upcoming stock splits include chipmaker Broadcom (NASDAQ:AVGO), which is splitting its stock 10-for-1 in July, and Williams-Sonoma (NYSE:WSM), the furniture retailer that is splitting its stock by half in coming weeks. The reasons stock splits are popular is that they make the shares more affordable for retail investors.
While it is true that stock splits don’t change the underlying fundamentals or valuation of a stock, they can make them more widely available to individual investors. Before Chipotle split its stock, an investor with $3,000 couldn’t buy a single share of the restaurant chain. After the split, Chipotle’s stock can be purchased for $60 per share.
Here are three stocks that should follow Nvidia and go for the split.
Fair Isaac Corp. (FICO)
Fair Isaac Corp. (NYSE:FICO) is the company behind everybody’s credit or “FICO” score. The company has been a going concern since 1956 and has a virtual monopoly on credit scoring services in the U.S.
This has made Fair Isaac a very good stock to own. Over the last 12 months, FICO stock has risen 93%, lifting the share price to just over $1,500. That’s pricey for most investors and makes Fair Isaac a good candidate for a stock split.
To date, Fair Isaac has split its stock a total of four times. However, the company hasn’t split its stock in 20 years.
All four previous stock splits occurred in the 10 years between 1995 and 2004. Given the length of time since the last split and the lofty price at which FICO stock currently trades, it is reasonable to assume that Fair Isaac could announce a split along with its next earnings report that’s scheduled for August 7.
Deckers Outdoor (DECK)
Another stock that has enjoyed a strong rally over the last year is Deckers Outdoor (NYSE:DECK), the shoemaker behind Hoka runners and Ugg boots.
Over the past 12 months, DECK stock has gained 79%. The rally has pushed the company’s share price up to about $949. While that’s down about 15% from the stock’s 52-week high, it is still quite high, especially for a blue-chip retailer such as Deckers Outdoor. Rival Nike’s (NYSE:NKE) stock is trading right now at about $75 per share.
The high share price makes Deckers Outdoor a good bet for a stock split in the not-too-distant future. DECK stock has been driven higher by quarterly financial results that have run circles around Wall Street forecasts. Deckers most recently announced first-quarter EPS of $4.95, crushing consensus estimates that called for $2.90. Revenue totaled $959.8 million, beating estimates of $885.04 million.
The company has achieved consistent double-digit revenue growth over the last four years and a more than threefold increase in its earnings per share. That growth shows no signs of letting up anytime soon. Deckers has only split its stock once before, on a 3-for-1 basis back in 2010.
AutoZone (AZO)
For a really expensive stock, look to AutoZone (NYSE:AZO). The retailer of automotive parts and supplies has a stock that is currently trading at about $2,863 per share. That’s prohibitively expensive for many investors, though the stock’s 52-week high is above $3,250 a share.
Given the sticker shock involved with its share price, many analysts are screaming for the company to split its stock.
AutoZone has previously split its stock twice, with the most recent split occurring on a two-for-one basis back in 1994. In the 20 years since its last stock split, AutoZone has performed extremely well, with strong earnings pushing the share price up 150% over the last five years, including a 14% gain in the past 12 months.
While impressive, the company’s long-term success has made its stock quite unaffordable at current levels.
On the date of publication, Joel Baglole held long positions in NVDA, FICO and DECK. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
