Companies often announce a stock split for several strategic reasons, such as improving liquidity, maintaining an optimal trading range, demonstrating confidence in future performance, or expanding the shareholder base.
A stock split can also address issues related to high stock valuations. This means that retail investors may find it less affordable to purchase shares. A higher price can discourage retail investors from entering the market or limit the number of shares they can buy.
Additionally, high-priced stocks are often perceived as having lower volatility due to their established market positions and consistent earnings, which can lead to steadier demand and reduced price fluctuations. This stability attracts long-term investors, resulting in lower trading volumes as these stocks are held for extended periods rather than frequently traded.
However, the high price of these stocks can make them less accessible to retail investors, limiting their ability to diversify effectively and potentially leading them to overlook undervalued options.
Given these factors, some companies might be preparing to announce stock splits to make their shares more attractive and accessible. Here are a few stocks that are expected to announce stock splits:
UltraTech Cement Limited
With a market cap of Rs. 3.25 lakh crores, the shares of the third largest cement producer in the world surged by 1.2 percent on BSE to Rs. 11.359.35 on Friday.
The company’s revenue from operations stood at Rs. 18,070 crores in Q1FY25, rising by 1.8 percent YoY from Rs. 17,737 crores in Q1FY24, and the net profit grew marginally by 0.3 percent to Rs. 1,695 crores from Rs. 1,690 crores, during the same period.
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The stock has delivered positive returns of nearly 36.7 percent in one year as well as around 8 percent returns year-to-date.
UltraTech Cement is likely overvalued due to its high P/E ratio of 46.2 and PEG ratio of 1.94, both of which are above typical thresholds for valuation.
The cement flagship company of the Aditya Birla Group, UltraTech Cement Limited is engaged in the business of manufacturing and sale of Cement and Cement-related products. It is India’s largest manufacturer of grey cement and ready-mix concrete, and one of the top manufacturers of white cement.
Dixon Technologies (India) Limited
With a market cap of Rs. 78,903.8 crores, the shares of an Electronic Manufacturing Services (EMS) company surged by 3.2 percent on BSE to Rs. 13,620 on Friday.
The company’s revenue from operations stood at Rs. 6,580 crores in Q1FY25, rising by 101 percent YoY from Rs. 3,272 crores in Q1FY24, and the net profit grew by 109 percent to Rs. 140 crores from Rs. 67 crores, during the same period.
The shares of Dixon Technologies have delivered multibagger returns of nearly 166 percent in one year as well as around 104.5 percent returns year-to-date.
Dixon Technologies is likely overvalued due to its high P/E ratio of 186 and PEG ratio of 4.4, both of which are above typical thresholds for valuation.
Dixon Technologies (India) Limited is primarily involved in the business of manufacturing consumer durables, home appliances, lighting, mobile phones, semi-conductors and security devices.
Bajaj Auto Limited
With a market cap of Rs. 3.03 lakh crores, the shares of the world’s largest manufacturer of three-wheelers surged by 1% on BSE to hit a new 52-week high at Rs. 10,916.4 on Friday.
The company’s revenue from operations stood at Rs. 11,932 crores in Q1FY25, rising by 15.7 percent YoY from Rs. 10,312 crores in Q1FY24, and the net profit grew by 18 percent to Rs. 1,942 crores from Rs. 1,644 crores, during the same period.
The shares of Bajaj Auto have delivered multibagger returns of nearly 132.5 percent in one year and around 62.6 percent returns year-to-date.
Bajaj Auto is likely overvalued due to its high P/E ratio of 37.9 and PEG ratio of 3.55, both of which are above typical thresholds for valuation.
Bajaj Auto Limited is engaged in the business of development, manufacturing and distribution of automobiles such as motorcycles, commercial vehicles, electric two-wheelers etc. and parts thereof, and sells its products in India as well as overseas.
Tata Elxsi Limited
With a market cap of Rs. 49,771.6 crores, the shares of a global design and technology services company surged by 5.2 percent on BSE to Rs. 8,343.95 on Friday.
The company’s revenue from operations stood at Rs. 926 crores in Q1FY25, rising by nearly 9 percent YoY from Rs. 850 crores in Q1FY24, but the net profit declined marginally by 2.6 percent to Rs. 184 crores from Rs. 189 crores, during the same period.
The shares of Tata Elxsi have delivered positive returns of nearly 8 percent in one year, but around 8.6 percent of negative returns year-to-date.
Tata Elxsi is likely overvalued due to its high P/E ratio of 64 and PEG ratio of 2.85, both of which are above typical thresholds for valuation.
Incorporated in 1989, Tata Elxsi Limited provides product design and engineering services to the consumer electronics, communications & transportation industries and systems integration and support services for enterprise customers. It also provides digital content creation for the media and entertainment industry.
Polycab India Limited
With a market cap of Rs. 1.02 lakh crores, the shares of India’s leading integrated manufacturers of cables and wires surged by 1.6 percent on BSE to Rs. 6,859.95 on Friday.
The company’s revenue from operations stood at Rs. 4,698 crores in Q1FY25, rising by 20.8 percent YoY from Rs. 3,889 crores in Q1FY24, but the net profit declined marginally by 0.2 percent to Rs. 402 crores from Rs. 403 crores, during the same period.
The shares of Polycab India have delivered positive returns of nearly 35 percent in one year as well as around 24.7 percent returns year-to-date.
Polycab India is likely overvalued due to its high P/E ratio of 57.5 and PEG ratio of 2.05, both of which are above typical thresholds for valuation.
Polycab India Limited is the leading manufacturer and seller in India for a wide range of wires and cables including power cables, control cables, solar cables, building wires, communication cables, welding cables and others, for retail and industrial use.
Written by Shivani Singh
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