Many retail investors have been put off by shares of the subscription video-streaming service at its current price level. A lower price is likely to attract a wider pool of investors.
Shares of Netflix spiked this morning but have retreated somewhat. The stock is up just over 1%.
"Netflix, is it a 'buy' after the stock split? First, you know that stock splits are cosmetic; they don't create any value," Jim Cramer said on Wednesday. "But Netflix is a stock individuals want to own, and they feel that they can't own a lot of it when it's at $700, so I imagine they'll be some buy. Now be careful here, when Apple (AAPL) split, do you know that stock went down, when you actually got the stock that day, for the next five days. So, don't get too excited. I understand that the stock is flying. You want to own Netflix because the opportunity is great, not because of the split."
TheStreet looks at other large companies that have recently undergone stock splits. Companies are paired with ratings from TheStreet Ratings to give investors perspective on whether they should buy now.
TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
TheStreet Ratings currently has a "Hold, C+" rating on Netflix, but other recent stocks that had stock splits all have "Buy" ratings.
Check out which S&P 500 companies recently underwent a stock split. And when you're done be sure to read which Dow stocks are the best of the best.
1. CF Industries Holdings Inc. (CF)
Industry: Materials/Fertilizers & Agricultural Chemicals
Market Cap: $3 billion
Rating: Buy, B
Stock Split: 5-for-1 on June 18, 2015
CF Industries Holdings, Inc. manufactures and distributes nitrogen fertilizers and other nitrogen products worldwide. The company's principal nitrogen fertilizer products include ammonia, granular urea, and urea ammonium nitrate solution.
TheStreet said: "We rate CF INDUSTRIES HOLDINGS INC (CF) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, CF's share price has jumped by 31.71%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CF should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The gross profit margin for CF INDUSTRIES HOLDINGS INC is rather high; currently it is at 55.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 24.18% significantly outperformed against the industry average.
- Even though the current debt-to-equity ratio is 1.13, it is still below the industry average, suggesting that this level of debt is acceptable within the Chemicals industry. Despite the fact that CF's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.53 is high and demonstrates strong liquidity.
- CF, with its decline in revenue, slightly underperformed the industry average of 14.7%. Since the same quarter one year prior, revenues fell by 15.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CF INDUSTRIES HOLDINGS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CF INDUSTRIES HOLDINGS INC increased its bottom line by earning $5.29 versus $4.93 in the prior year. For the next year, the market is expecting a contraction of 16.1% in earnings ($4.44 versus $5.29).
- You can view the full analysis from the report here: CF Ratings Report
2. Marathon Petroleum Corp. (MPC)
Industry: Energy/Oil & Gas Refining & Marketing
Market Cap: $28.4 billion
Rating: Buy, A
Stock Split: 2-for-1 on June 11, 2015
Marathon Petroleum Corporation, together with its subsidiaries, engages in refining, marketing, retailing, and transporting petroleum products primarily in the United States. It operates through three segments: Refining & Marketing, Speedway, and Pipeline Transportation.
TheStreet said: "We rate MARATHON PETROLEUM CORP (MPC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- MARATHON PETROLEUM CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, MARATHON PETROLEUM CORP increased its bottom line by earning $4.42 versus $3.31 in the prior year. This year, the market expects an improvement in earnings ($5.49 versus $4.42).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 347.7% when compared to the same quarter one year prior, rising from $199.00 million to $891.00 million.
- Net operating cash flow has significantly increased by 55.35% to $1,190.00 million when compared to the same quarter last year. In addition, MARATHON PETROLEUM CORP has also vastly surpassed the industry average cash flow growth rate of -53.29%.
- You can view the full analysis from the report here: MPC Ratings Report