Stock Split Watch: Is Eli Lilly (LLY) Stock Next?
Key Points
The public doesn't know when, or if, an Eli Lilly split is happening soon.
It doesn't really matter, though, since splits are largely nonevents.
Still, the stock is worth considering as a long-term investment.
- 10 stocks we like better than Eli Lilly ›
For aficionados of stock splits, it's an intriguing question: Will Eli Lilly (NYSE: LLY) be the next company to split its stock? It certainly might -- its stock price was recently $1,280 per share. But the honest answer is that no one knows (except, perhaps, Lilly's management).
Eli Lilly has split its stock four times -- twice in the 1980s and twice in the 1990s, with the last split happening in October of 1997, nearly 30 years ago. Let's see whether it might do a split again -- and what it means for investors.
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Companies generally don't have any pressing need to split their stock, but when shares seem unaffordable for average investors, splitting can make sense. (Not every investor realizes this, but these days, some brokerages permit buying fractions of shares, which can solve the problem of an unaffordable share price.)
Stock splits tend to excite many investors -- because if you own, say, 200 shares of a company, it can feel great to suddenly own, say, 400 shares (via a 2-for-1 split) or 1,000 shares (via a 5-for-1 split). But they're really mostly nothing burgers. Here's why.
Imagine that you own 10 shares of Scruffy's Chicken Shack (ticker: BUKBUK), which is trading at $1,000 per share. The total value of your holding is therefore $10,000. Let's say Scruffy's splits its stock 2-for-1. You'll own 20 shares post-split.
However, share prices are adjusted downward proportionately at the split. So a $1,000 stock becomes a $500 one -- and your 20 shares are now worth ... $10,000 (20 times $500). See? Nothing burger.
Potential stock split aside, should you invest in Eli Lilly? It's worth considering -- because it's doing quite well. Second-quarter revenue was up 48% year over year, largely due to boffo sales for its Mounjaro and Zepbound drugs, which are being used by many to lose weight.
Lilly's stock isn't super cheap right now, though, with a recent price-to-earnings (P/E) ratio of 41 -- though that's below its five-year average of 58. Still, it might serve long-term investors well.
Should you buy stock in Eli Lilly right now?
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Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool has a disclosure policy.
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