Apple Inc. (AAPL): Value Creation and Stock Splits

And if Apple Inc. (NASDAQ:AAPL) can pull off another 2-for-1 or 3-for-1 split in the near-term after conducting a sizable share repurchase, the company’s market cap in the equity markets could get a boost. Apple’s management had previously stated that they have evaluated the possibilities of a stock split, but haven’t taken that course. However, they haven’t ruled out a stock split in the future.

Even though stock splits don’t create any real value or have a material impact on a company’s business, stock splits do lead to a much wider and broader investor base, which leads to higher demand/supply of shares in the open market.  Apple can possibly increase its market cap from existing levels, if the company’s management decides to split the stock.

Value creation

If a company has ample cash in hand and its shares are undervalued significantly from its intrinsic value, a buyback represents a great investment from the company’s standpoint. In my view, if Apple Inc. (NASDAQ:AAPL) makes a sizable repurchase at the current going prices of $400, the company can generate value for its shareholders. And after that, if the company can execute a 2-for-1 or even a 3-for-1 stock split the company can extract a lot of value from the equity markets.

The article Apple: Value Creation and Stock Splits originally appeared on Fool.com and is written by Ishfaque Faruk.

Ishfaque Faruk has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Ishfaque is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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