As Fools, we know the value of a stock split: zero. It's a nonevent. Instead of a $20 bill in your wallet, you've got two $10 bills. You're eating 12 smaller slices of your pizza instead of six larger ones.

So if stock splits mean nothing, why do companies do them? A few reasons, really, none of which has anything to do with whether the stock is a good investment. Here are the usual reasons:

  • To make it look cheap.
  • To increase liquidity.
  • To meet stock-exchange listing requirements.
  • To express a bullish management sentiment.

Regardless of the reason, the market tends to view stock splits as positive events, and a company's shares can get a short-term boost from the news. If the business isn't a good, long-term company, it doesn't matter whether its shares split, or whether you buy them before or after.

A split decision
That's why we pair up stock-split announcements with the sentiments of the more than 60,000 investors at Motley Fool CAPS. Every day, professional and novice investors rate the prospects of thousands of stocks, resulting in a rating between one and five stars (five being the best). If the best stock-pickers think a company's long-term performance is outstanding and the company has announced the bullish signal to split its shares, maybe investors should take notice.

Then we dive in and see what exactly the CAPS community has to say about some of these companies. Here is a list of stocks that have recently announced stock splits.



Announcement Date

Date Payable

CAPS Rating

Research In Motion (NASDAQ:RIMM)





Noble (NYSE:NE)





Johnson Controls (NYSE:JCI)





Manitowoc (NYSE:MTW)





McDermott International (NYSE:MDR)





Source: Company SEC filings. Ratings courtesy of Motley Fool CAPS.

Other than BlackBerry maker Research In Motion, this is a highly rated group of companies with investors as confident about their prospects as management apparently is. Why does the CAPS community have such a dour outlook on the one?

On the RIM of change
Although more than 900 investors think the manufacturer of the hot handheld-communication device will outperform the market, 700 don't, and nearly half of the All-Stars -- investors who consistently outperform their peers over time -- who weighed in think Research In Motion won't, either. In particular, valuation heads their concerns, as Polarimetric makes clear:

This thing's price is absolutely ridiculous. This stock has enjoyed a gigantic rise of nearly 400% in the past year with nothing monumental enough to back it up. P/E of 222? I'll pass. This stock has become accustomed to rising more than 2% for absolutely no reason whatsoever. I believe this company is a strong one, and Blackberries certainly are successful, but if anyone is going to be expected to want to buy this stock, this thing's going to have to sink well below $200, and it will, eventually. I thought this thing was in a bubble when it hit $150. Now this price level is laughable.

For the record, a stock split would not cure that sky-high P/E either. Earnings per share get similarly reduced.

While RIMM is an audaciously priced stock right now, there are some deeper concerns, too. It will be intensely competing against Apple's (NASDAQ:AAPL) iPhone while also losing a grip on its margins. Expanding into China can provide an outlet for growth, but China Unicom is already offering its rival RedBerry service. But as CAPS player autumnwake notes, "First earnings miss and this one will get slammed." Split or no, buyer beware.

'Tis a noble cause
That's not the case with oil and gas industry services provider Noble. Of the more than 600 CAPS investors who have chimed in on the company, 98% believe it will outperform the market. More than a third of those investors are considered All-Stars, and only two see it falling down. CAPS member wcwhiner says slowing economic growth should halt energy's rise: "Yeah, I'm still stubbornly shorting the energy patch on my slowing-growth thesis. A terrible bet so far, but it's going to take decent economic data to change my mind."

The bull arguments gets far more attention, though, with deadcat2 receiving top honors for the valuation work he posted back in February, which has turned out to be quite prescient. (The Fool's own David Gardner, a.k.a. TMFBreakerDave, highlighted the valuation work in his own pitch.) In concluding his thoughts, deadcat2 wrote:

I just can't believe that the market will allow these companies to slip into single digit p/e's as they continue to report higher and higher earnings. With tensions in the mideast and South America, and the great leviathan of China and other emerging economies demanding more and more energy resources, the likelihood is that the mid- and long-term demand for oil will go ever higher - and with increasing demand there should be little regression of prices. All that adds up to a strong play with a limited downside to me.

While the price has risen since then and no longer sports the same valuation, CAPS investors remain positive about Noble's prospects which, considering the stock-split announcement, management must too.

Sound off! 1-2 ...
How about you? Think there's a gusher of opportunity remaining in Noble? Has the well run dry for Research In Motion? Get in the mix with Motley Fool CAPS and share with tens of thousands of your fellow investors how you feel about these stock-split stories.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.