Stock splits excite investors for two reasons. They reduce the price per share, and they often hint at a competitively advantaged company with solid financials. Stock splits generally follow substantial share price appreciation, and that rarely happens to companies that lack sound fundamentals.

With that in mind, Chipotle Mexican Grill (CMG 2.41%) and Palo Alto Networks (PANW 0.91%) rewarded shareholders with monster returns of 345% and 395%, respectively, over the last five years. That share price appreciation makes both companies stock-split candidates in 2024. More importantly, it shows that both stocks can create value for patient shareholders, and investors should aspire to own such companies.

To that end, whether they split their stocks or not, Chipotle and Palo Alto are worthwhile long-term investments.

1. Chipotle Mexican Grill

Chipotle owns more than 3,300 fast-casual restaurants across North America and Europe. The company has built a reputable brand by focusing on "food with integrity." Specifically, it sources only responsibly raised meats that have never been treated with hormones or antibiotics. It uses only organically grown produce and fresh ingredients, meaning no preservatives, freezers, or can openers are involved in food preparation.

That strategy clearly resonates with consumers, as Chipotle regularly outperforms its peers in key metrics like same-store sales and customer traffic. Indeed, the company reported 5% same-store sales growth in the third quarter, more than double the restaurant industry average, and traffic increased by 4% despite a decline in traffic across the broader industry.

Total revenue rose 11% to $2.5 billion in the third quarter, driven by new restaurant openings and strong same-store sales. Better yet, generally accepted accounting principles (GAAP) net income jumped 23% to $11.32 per diluted share due to operating margin expansion and stock buybacks. Management also highlighted better staffing, as well as improvements in throughput and digital order accuracy.

To summarize, Chipotle continued to grow at a steady clip while making progress on strategic priorities. The company also guided for 285 to 315 new restaurant openings in 2024, which represents a 9% increase in store count, and management expects that pace to approach 10% in 2025. That lays the foundation for solid sales growth.

Indeed, Morningstar analyst Sean Dunlop expects Chipotle to grow revenue at 13% annually over the next decade. In that light, the current valuation of 6.7 times sales appears reasonable despite being a premium to the three-year average of 6 times sales. Investors should consider buying a small position in this stock today.

2. Palo Alto Networks

Palo Alto provides solutions for network security, cloud security, and security operations, and the company is working to consolidate its platforms. For instance, its network security portfolio includes next-generation firewalls and a secure access service edge. The company recently unified those products under Strata Cloud Manager, a zero-trust management platform powered by artificial intelligence.

Similarly, Palo Alto recently introduced Cortex XSIAM (extended security intelligence and automation management) to unify a broad range of security operations products. Cortex XSIAM leans on machine learning models to detect, investigate, and respond to threats across networks, endpoint devices, identities, and cloud workloads.

According to Morgan Stanley, Palo Alto holds more market share in network security and cloud security than any other vendor. Additionally, Forrester Research recently recognized the company as a leader in zero-trust platforms, citing a stronger current offering and a stronger growth strategy than any other vendor. The report awarded Palo Alto perfect scores in device security, cloud application protection, and automation.

Palo Alto gave a strong performance in the most recent quarter. Revenue rose 20% to $1.9 billion, and non-GAAP net income soared 75% to $266 million. Investors can expect a similar growth trajectory in the future. Palo Alto should benefit from an increasingly sophisticated threat landscape, regulatory tailwinds like new reporting requirements for public companies, and growing demand for cybersecurity automation.

To quote Argus analyst Joseph Bonner, "What makes Palo Alto stand out from its sector peers is not just best-in-class technology integrated into a comprehensive cybersecurity platform, but also its rapid product innovation cycle, focus on next-generation cloud security, secure access at the service edge, and automated security operations."

With that in mind, Palo Alto is targeting annual sales growth of 18% over the next three years. That projection makes its current valuation of 15.9 times sales seem fair, though it is a premium to the three-year average of 10.2 times sales. Patient investors should feel comfortable buying a small position in Palo Alto stock today.