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Companies like Nvidia and Chipotle aim to make their stocks look more affordable. Investors should tread carefully.

HOKA shoes aren’t cheap, but if you happen to own the company stock you can buy six pairs for the price of a share. The deal will end soon, though. HOKA’s parent, Deckers Outdoor, is planning a 6-for-1 split of its $920 stock in early September. If prices hold, one share of Deckers would buy one pair of shoes at $153 a pop, tax not included.

This is silly math, of course, because anyone who owns the stock before the split will have the same dollar amount afterward. But a $150 stock does look cheaper than a $900 one, and that fuzzy logic is behind a split fever gripping the market.

Scores of large companies have split their shares this year, including Broadcom, Chipotle Mexican Grill, Nvidia, and Walmart. The split pipeline now includes Cintas, Lam Research, and Sony Group.

A thriving bull market has pushed many stocks deep into triple digits, creating more candidates for splits. More than 100 companies in the S&P 500 index now have a share price above $250, including Visa, FedEx, and Home Depot. The $500+ club is populated by names like BlackRock, Costco Wholesale, and Netflix.

Companies often split their shares to make them look more affordable, betting that a $50 stock will be more attractive than a $500 one. The trend soared during the 1990s dot-com bubble, petered out after the 2008-09 global financial crisis, and is reviving amid a lengthy market rally.

But tread carefully in the split parade. Lower prices don’t mean cheaper stocks—they just cut the same loaf into thinner slices. Some of the best stocks of all time have eschewed splits: Warren Buffett has never split the Class A shares of Berkshire Hathaway. Moreover, companies often split their shares after a big run; a split may signal a top in a stock, with the curse of high expectations to follow.

“Investors should be cautious and more focused on earnings,” says Quincy Krosby, chief global strategist for LPL Financial. While stock splits could broaden the base of investors, they do nothing to alter a company’s fundamental outlook, she adds.

Companies often tout splits as investor- and employee-friendly moves. Chipotle, for instance, said in March that splitting its stock—then trading around $2,800 a share—would make it “more accessible to employees as well as a broader range of investors.” Deckers said the nearly identical thing in July, claiming that its split “would make our shares more affordable and attractive to a broader group of potential investors.” Deckers also cited improved liquidity as a rationale, saying that the split could increase trading and “have a positive impact” on the stock’s value.

Investors often view a split as a positive signal from management about a company’s prospects. Stocks get bid up in anticipation of higher earnings, and analysts provide support; they tend to lift estimates for earnings per share by about 2% after splits are announced, according to a Columbia University study. The effects linger for at least a year: According to research from Bank of America , companies that announce splits have returned a median 25% in the year after a split was announced, compared with 11.9% for the S&P 500.

Other studies find mixed results. Morningstar recently looked at one-year returns of S&P 500 companies that had split over the past decade. The study found no overall trend in the data, indicating that “stock splits are just cosmetic,” though a few names stood out: DexCom, Paccar, and Charter Communications each notched gains of more than 40% after splitting.

“Stock splits do tend to temporarily boost a stock price, but they shouldn’t matter for the long term,” says Kurt Spieler, chief investment officer of wealth management at FNBO.

What matters, of course, is whether a company consistently meets or beats Wall Street’s forecasts on measures like sales, earnings, and dividends. A lower share price after a split may improve a stock’s liquidity and trading dynamics, but those effects will peter out if earnings don’t live up to expectations.

What also counts more than prices are the ratios—things like price/earnings or price-to-sales. Splits just divvy up aggregate figures across a wider base at the same ratios per share. Berkshire’s Class B shares trade for $438, for instance. That might look pricey, but since the company is expected to earn $19 a share this year, the stock has a P/E ratio of 23, roughly in line with the S&P 500’s multiple.

Stock math can be just as punishing for a high-price stock before it splits as after. Chipotle now looks a little cheaper, but that has nothing to do with its 50-for-1 split. Rather, it reflects the fact that its P/E ratio has gone from a sky-high 56 to a still-pricey 47, resulting from a 15% slide since late June. The fall came amid a selloff in high-growth momentum stocks, timed almost perfectly with Chipotle’s split going into effect.

As a practical matter, splits are no longer necessary in the retail investing marketplace. Fractional shares are now widely available. If you want to invest, say, $100 in Booking Holdings —a $3,700 stock—you can buy that much through Fidelity, Charles Schwab, and other brokerages.

But investor psychology may be helping splits stay alive. Owning fractional shares isn’t as satisfying as owning full shares at a lower price, says Nancy Tengler, chief investment officer of Laffer Tengler Investments. “People like the idea of owning a substantive amount of stock, full shares over a fractional share,” she says.

Tengler’s firm owns shares in Chipotle, along with other high-price stocks she thinks could be split candidates, such as Microsoft, Goldman Sachs, Adobe, ServiceNow, and O’Reilly Automotive. All trade for at least $400 a share.

Tengler doesn’t own these stocks because she thinks they will split; all are market-leading companies with strong earnings, healthy balance sheets, and reasonable valuations, she says.

None of this means that splits are sell signals. While trading may not live up to hopes due to near-term volatility, companies that demonstrate the ability to keep growing profits will get rewarded long after a split. “Stock splits tend to come from bigger companies that already have a lot of momentum and high prices,” says Jimmy Lee, CEO of The Wealth Consulting Group, which owns Nvidia.

One reason that companies may keep splitting their stocks is to gain entry into a legendary index: the Dow Jones Industrial Average. The index is archaically weighted by price, unlike the S&P 500, which is weighted by market cap. Companies such as Apple and Amazon.com got into the Dow after splitting their shares; Nvidia could now be a good candidate to replace Intel, given the latter’s low share price.

Other potential candidates include Meta Platforms, Eli Lilly, and Costco—all megacaps with high prices and market-leading positions that could make them Dow-worthy if they split. But don’t hold your breath. The Dow rarely makes room for new stocks, and companies like Meta say they have no intention of splitting.

Be careful of stocks on the cusp of a split. Deckers, for one, is already up 38% this year and trades at a lofty 26 times estimated 2025 earnings. While a split could give the stock a short-term pop, HOKAs will have to keep flying off the shelves for the stock to keep running.