Stock-split euphoria is beginning to take shape on Wall Street.
A new company is set to join O'Reilly Automotive and Fastenal as 2025's high-profile stock splits.
Wall Street's newest stock-split stock is taking full advantage of the S&P 500's bull market and the dynamic behavior of investors during long-winded periods of optimism.
For much of the last two-and-a-half years, the evolution of artificial intelligence (AI) has dominated the discussion on Wall Street. Investors almost always have a next-big-thing trend to captivate their attention, and AI has certainly fit the bill since late 2022.
However, AI isn't the only trend investors have rallied around. Stock-split euphoria has played an equally important role in lifting Wall Street's tide and extending the current bull market rally in the benchmark S&P 500 well beyond two years.
Image source: Getty Images.
Stock-split euphoria takes center stage on Wall Street
A stock split is a tool publicly traded companies have at their disposal that allows them to superficially alter their share price and outstanding share count by the same factor. These adjustments are considered cosmetic because they have no impact on a company's market cap or underlying operating performance.
Splits come in two varieties, with one overwhelmingly favored by the investing community, relative to the other. The less-desirable of the two is a reverse split, which is designed to increase a company's share price. This type of split is often effected to avoid delisting from a major stock exchange, and it's usually undertaken by struggling companies.
Public companies whose shares have soared to the point where a forward split is needed are typically out-innovating and out-executing their peers on multiple fronts. In short, forward stock-split announcements act as something of a beacon to alert investors to companies that are checking all the right boxes.
Furthermore, companies conducting forward splits have a knack for outperforming. Based on an analysis from Bank of America Global Research, public companies completing forward splits have averaged a 25.4% annual return in the 12 months following their announcement. Meanwhile, the S&P 500 has delivered a more modest 11.9% return over this same timeline.
Brand-name businesses are turning to stock splits to attract everyday investors
In 2024, more than a dozen high-profile companies completed forward splits, including AI juggernauts Nvidia and Broadcom, as well as retail chain Walmart.
While 2025 began rather slowly on the stock-split front, some brand-name businesses have begun taking the plunge.
Things kicked off in mid-March, with the board of auto parts supplier O'Reilly Automotive(NASDAQ: ORLY) declaring a 15-for-1 forward split. Assuming shareholders approve the split at the company's annual shareholder meeting next week (May 15), it'll go into effect following the close of trading on June 9.
O'Reilly has been able to take full advantage of consumers hanging onto their vehicles longer than ever before. S&P Global Mobility released a report in May 2024 that showed the average age of cars and light trucks in the U.S. rose to 12.6 years from 11.1 years in 2012. Though newer vehicles are built to last longer, the aging of existing vehicles on U.S. roadways points to consumers and mechanics relying on parts suppliers like O'Reilly Automotive to keep aging vehicles in tip-top shape.
O'Reilly also has one of the most successful share-repurchase programs among public companies. Since initiating its buyback program in 2011, the company has repurchased nearly 60% of its outstanding shares at a cost of almost $26 billion. For businesses with steady or growing net income, buybacks help to lift earnings per share.
Industrial and construction supplies wholesale distributor Fastenal(NASDAQ: FAST) also joined the party. Its board approved a 2-for-1 forward split, which is set to take effect after the close of trading on May 21.
Fastenal has been something of a stock-split machine since going public in August 1987. This marks its ninth split in 38 years, with its stock gaining nearly 124,000% since its debut. Fastenal's close-knit ties to the U.S. economy, and the simple fact that periods of economic growth last substantially longer than recessions, has ensured relatively steady long-term growth.
It's also a company that's benefiting from its ongoing investments in e-commerce and higher-margin digital solutions. On-site, internet-connected vending machines are an example of a way Fastenal can make rapid direct sales, as well as better understand the supply chain needs of its customers to lower their costs. In turn, this ingrains Fastenal as an integral component of industrial supply chains.
Image source: Getty Images.
Wall Street's newest stock-split stock has more than quadrupled in five years
However, the stock-split stock "Class of 2025" is growing even larger -- as well as making history.
On April 15, automated electronic brokerage firm Interactive Brokers Group(NASDAQ: IBKR) unveiled its first-quarter operating results. Contained within these results, which I'll touch on in a moment, was an announcement that it would complete a 4-for-1 forward split following the close of trading on June 17.
This split is historic, as it represents the first in the company's history. It also follows a stunning 343% trailing-five-year romp higher in the company's stock, as of the closing bell on May 6. Interactive Brokers specifically mentioned its desire to "make stock ownership more accessible to investors" as the reasoning behind its split.
If you're wondering what's facilitated a more-than-quadrupling in the company's shares over the last five years, look no further Wall Street's outsized returns, as well as the dynamic trading patterns of Interactive Brokers' customers.
Just as Fastenal benefits from long-winded periods of economic expansion, Interactive Brokers Group usually enjoys tailwinds associated with lasting bull markets. Typically, it'll see an increase in aggregate trading activity, customer equity, and even cumulative margin loans held by customers. Though we've experienced outsized volatility in recent weeks, the S&P 500 bull market that began in October 2022 remains intact.
To build on this point, as well as address the "dynamic trading patterns" I alluded to earlier, Interactive Brokers has benefited from the "quad-fecta." Over trailing-two-year period, ending March 31, 2025:
The aggregate number of customer accounts has skyrocketed by 65%, from 2.2 million to 3.62 million.
Customer equity on its platform has surged by 67% to $573.5 billion.
Customer margin loans have increased by 62% to $63.7 billion.
Daily average revenue trades (i.e., total customer orders divided by the number of trading days in a period) have soared by 72% to 3.52 million.
In other words, there are more customers, making more trades, with more equity on the platform, and some are borrowing on margin with interest rates that are higher now than they were three years ago. You couldn't write a better scenario for Interactive Brokers Group.
The only thing that keeps Interactive Brokers stock from being a slam-dunk investment is that it's not cheap. Although its stock has retraced 24% from its all-time high set less than three months ago, its forward price-to-earnings (P/E) ratio of nearly 23 still represents a 14% premium to its average forward P/E over the trailing five-year period.
There's also the possibility of economic uncertainty and stock market fear related to President Donald Trump's tariff policy weighing on investors' desire to make trades. While there's been no evidence of customers slowing down their trading activity through March, Interactive Brokers' latest report doesn't account for the tariff-related volatility witnessed in April.
Though Interactive Brokers Group appears to be a fine long-term investment, its valuation has some catching up to do in the coming quarters.
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Bank of America is an advertising partner of Motley Fool Money. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Bank of America, Interactive Brokers Group, Nvidia, and Walmart. The Motley Fool recommends Broadcom and recommends the following options: long January 2027 $175 calls on Interactive Brokers Group and short January 2027 $185 calls on Interactive Brokers Group. The Motley Fool has a disclosure policy.
