In January, I wrote that Chipotle Mexican Grill could split its stock in 2024. Sure enough, the company approved a 50-for-1 split two months later. Shares have risen 2% since the announcement, possibly because investors are excited. Stock splits make shares more affordable, but they can also spotlight fundamentally strong companies.

I say that because stock splits are only necessary after significant price appreciation, which rarely happens to companies that lack a competitive advantage. For instance, Chipotle has built brand authority by focusing on fresh ingredients and responsibly raised meat. That has translated into strong financial results and share price appreciation. Revenue increased at 18% annually over the last three years, and the stock more than doubled in value.

However, the stock split itself is irrelevant. Substantial and sustained price appreciation is what tells investors the company is doing something right.

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Source Fool.com