When a company’s shares have been on a tear, or their high price tag is scaring away potential investors, a stock split can be just what the doctor ordered. Sure, fractional shares have made it easier than ever to invest in pricey stocks. But there’s still something psychologically satisfying about owning a whole share of a given stock.
Plus, retail investors tend to view stocks differently after a split. Importantly, that newfound attention often translates into a nice valuation bump for the stock that split.
That’s why I’ve got my eye on three companies that are poised to split their stocks in the coming months. Let’s dive in!
MicroStrategy (MSTR)
MicroStrategy (NASDAQ:MSTR) has been flying high after the recent Bitcoin (BTC-USD) rebound. Notably, I think this is a crypto stock that can definitely surge higher. That’s particularly true if this recent crypto bull market persists.
MicroStrategy is eyeing a 10-for-1 stock split of its class A and class B common stock soon. This stock split is one of the various reasons many investors are bullish on MSTR stock. Indeed, this transaction is set to be one of the most-watched stock splits this summer. If everything goes according to plan, the split will be completed on August 7.
Personally, I think chasing MSTR right now is risky. The stock has already soared over 156% year-to-date as crypto markets have heated up. While MSTR stock could climb higher if Bitcoin continues its move higher, buying in now feels like jumping onto a moving train. The smarter play may be to wait for a crypto cooldown period to initiate a position. MicroStrategy essentially provides investors with a leveraged bet on crypto, and all the volatility that entails. There’s certainly money to be made if the timing is right, but I’d tread carefully with this one.
Analysts have mixed views on where MicroStrategy stock is headed. The consensus price target on MSTR stock sits around $2,186, but estimates range from as low as $210 from Jefferies to as high as $2,890 from Bernstein.
White River Bancshares (WRIV)
White River Bancshares (OTCMKTS:WRIV) operates as the bank holding company for Signature Bank of Arkansas. The company has faced challenges in recent years, much like many regional banks following the “mini-banking crisis” (as my colleague Larry Ramer dubs it) last year.
WRIV stock has been on a bumpy ride, currently trading around 32% below its 2021 highs and 18% lower than its pre-COVID crash levels. However, I believe a turnaround is on the horizon as banks finally start to recover. Importantly, WRIV stock has already climbed 6.4% from its trough this year, and I see plenty of room for growth ahead.
Adding to the optimism, White River Bancshares posted earnings of $1.85 million, or $1.61 per diluted share, for the second quarter of 2024. This was driven by successful capital raises and net interest margin expansion. The company also declared an annual cash dividend of $1.00 per share and a 2-for-1 stock split, with each shareholder of record on August 7, 2024, set to receive one additional share for each share held.
Cintas Corporation (CTAS)
Cintas Corporation (NASDAQ:CTAS) provides corporate identity uniforms and related business services to companies primarily located in North America. The stock has been on a tear lately, rallying nearly nonstop over the past four years, appreciating nearly 200% over the past five years. It makes sense why its board is splitting the stock which trades around $761 per share at the time of writing. In this case, Cintas is expected to issue a four-to-one stock split, and shares are expected to begin trading on a post-split basis at the market open on Thursday, September 12. That’s right around the time summer ends.
Cintas recently reported strong results for its fiscal 2024 fourth quarter, which ended May 31, 2024. Revenue increased 8.2% to $2.47 billion, while diluted earnings per share jumped 19.8% to $3.99. For the full fiscal year, revenue grew 8.9% to $9.60 billion, and EPS rose 16.6% to $15.15. Operating margins also expanded impressively. Cintas has strong business momentum.
I’m a bit concerned about valuation, though. Cintas trades at a lofty price-earnings ratio of 46-times. Given the company’s consistency and growth, some of this multiple is deserved. However, this valuation does raise the risk profile of CTAS stock for investors looking to jump in at these levels.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. 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.
