These 8 stocks turned multibagger post-stock splits in fiscal year 2024

Exploring the effects of stock splits on investment returns.

In the fiscal year 2024, a total of 94 stock splits were announced by companies with a market capitalization above Rs 500 crores, and 44 of these were executed. Post-split, 30 stocks saw an increase in their value, whereas 14 witnessed a decline. Generally, stock splits make shares more affordable, adjusting the risk and potential loss. The most dramatic loss recorded was around 40% for Hardwyn India after a 10:1 split, despite a one-year return of 17.64 per cent. Interestingly, eight stocks experienced substantial gains, turning into multibaggers after the split.

Here's a detailed look at the stocks that significantly multiplied in value post-split:

Data as of April 25, 2024.

Key Observations on Stock Split Returns:

Widespread Positive Returns: Many stocks showed remarkable gains after the split, suggesting that the splits were favorably received by the market, likely due to increased affordability and accessibility for a broader investor base. EFC (I), for example, realized an astounding 1590.27% return post-split.

Variability in Returns: The results post-split varied significantly across different stocks. While some recorded high returns, others saw their value decrease, pointing to additional influences such as market trends or specific company factors that might affect stock prices after a split.

Diversity in Split Ratios: The observed split ratios ranged from 2:1 to 10:1, with no direct link between the split ratio and subsequent returns, indicating that various factors including performance, sector conditions, and market environment are more crucial in defining post-split success.

Investor Perception: Splits might be interpreted by investors as a positive signal from management, suggesting optimism about ongoing business success. However, since the market cap remains the same, the intrinsic value does not change, leading to mixed results in terms of stock performance.

Short-term Versus Long-term Impact: Immediate gains can be impressive, suggesting robust short-term interest, but the long-term outlook should be carefully monitored. Some stocks show enduring returns a year after the split, indicating sustained confidence and favorable market dynamics surrounding these companies.

Concerns Over Negative Returns: Stocks with declines post-split highlight that positive outcomes aren't guaranteed. Market downturns or industry-specific challenges can heavily impact performance.

Conclusion

The varied outcomes of stock splits in FY 2024 showcase a complex interaction of market perceptions, investor sentiment, and core business operations. Companies contemplating a split should ensure transparent communication about their future potential to optimize stock value impact. Meanwhile, investors should weigh splits within a larger investment strategy, considering underlying company fundamentals and prevailing market conditions rather than relying solely on the occurrence of a split.

Disclaimer: The article is for informational purposes only and not investment advice.