The S&P 500 (SNPINDEX:^GSPC) has been hitting record highs lately, leading some to wonder whether the stock market is overpriced. Looking at individual components of the S&P, it's easy to find some stocks with exceedingly high share prices.
Of course, share price alone doesn't determine a company's value. You also have to consider how many shares a company has outstanding. Perhaps the most obvious example is Berkshire Hathaway, whose A shares fetch almost $170,000. Yet because it only has about 1.65 million shares outstanding, compared with the billions that most big companies have, Berkshire's total market cap, while impressive, is still not the highest in the market. In addition, only once the company issued its B shares, which are worth a bit more than $110 each, did Standard & Poor's give Berkshire admittance to the index.
Regardless, a high share price typically indicates that a stock has performed well. So with that in mind, let's take a closer look at the four stocks in the S&P that have the most expensive shares.
4. Intuitive Surgical (NASDAQ:ISRG), $484
Robotic-surgery pioneer Intuitive Surgical from $14 a decade ago to its current lofty levels. With its da Vinci surgical system, Intuitive Surgical has opened up new frontiers in medicine and spurred competitors to build robotic systems of their own.
Intuitive's stock actually came close to the $600 mark earlier this year, but recently concerns about the safety of robotic surgery have weighed on the stock. With an FDA investigation ongoing, investors might not feel confident about the company's prospects until it's cleared of any safety concerns. If the company can remedy any potential problems, however, Intuitive has plenty of upside growth potential left in its future.
3. MasterCard (NYSE:MA), $585
The card-network giant is No. 2 in its industry, but MasterCard's share price has soared since its 2006 IPO at $39 per share. By moving beyond its original credit card focus to be a first-mover in debit cards and, more recently, mobile payment technology, MasterCard has done its best to defend its lucrative turf as a gatekeeper for millions of customers seeking to move money around the world.
High earnings multiples have some investors worried about whether the company can sustain fast-enough growth to justify the current share price. But with the stock having consistently hit new record highs since late 2011, MasterCard has recovered from the challenges of the financial crisis and appears to have a lot further to go.
2. Priceline.com (NASDAQ:BKNG), $814
It's hard to believe that the online travel portal giant traded so low in 2003 that it had to do reverse share split. Since then, the share price has jumped 35-fold, as Priceline has outdueled its competitors with a combination of its unique name-your-own-price model and its early recognition of the importance of international travel to its overall success.
Priceline has only continued its massive run recently, and despite high earnings multiples and growth hurdles from weak economic conditions in certain overseas markets, the company continues to see its stock press higher. With a market cap of just $40 billion, Priceline could easily continue to climb in its effort to overtake the tech giant in the No. 1 spot.
1. Google (NASDAQ:GOOGL), $909
Google went public at $85 back in 2004, and its roughly tenfold increase makes its position atop the S&P leaderboard seem almost undeserved. But the company's dominance in online search and its resourceful recognition of the value of the data it has collected over the years has created huge amounts of value for shareholders.
Moreover, the biggest monetization opportunities for that data might still be yet to come. As mobile devices become more powerful and add location-based information to existing datasets, Google should be able to put its collection efforts to more lucrative use in identifying trends and finding opportunities for profit. Given enough success, Google's potential might make even a $900 share price look quaint in future years.
Price isn't value
Again, high share prices don't automatically mean that a stock is overvalued. You have to look at the earnings and other fundamentals that drive valuations in order to determine the relative value proposition of these stocks. What's certain, though, is that all four of these companies have produced strong growth over the years, and if they can continue to do so, then these high share prices could prove to be just the beginning of their long-term success.