What is 'Split Adjusted'

Split adjusted is a term applied to all data that undergoes modifications following a split, or division, of a stock's share price. This allows for analysis between current price and other data to price and other data from the past.

A stock undergoing a three to one split (a split ratio of 3:1) sees its share price divided by three, while the number of share outstanding triples, keeping the overall company valuation constant.

Stocks can reverse-split, creating fewer shares at a higher price, again with valuation remaining the same.

BREAKING DOWN 'Split Adjusted'

Companies split their shares for multiple reasons but the primary reason is to keep their share price affordable to most people. The thinking is that it will have higher investment interest, wider ownership and a stronger secondary market. All of these components contribute to making it easier and cheaper to raise additional capital with a primary market offering of additional shares.

Reverse stock splits, also known as a stock consolidation or share rollback, create higher priced shares. There are a number of reasons why a company may decide to reduce its number of outstanding shares in the market, which, unfortunately for the company, may be the result of poor stock performance. In the vast majority of cases, a reverse split is undertaken to fulfill exchange listing requirements.

Other Considerations for Split Adjusted Stocks

Investors owning stocks that undergo splits see little effects in terms of the value of their holdings, other than a change in the number of shares in their account. One hundred shares of a stock at $50 per share has the same value as 200 shares of the same stock trading at the split price of $25 per share.

Per share data, such as earnings, revenues, sales, etc., will indeed change. However, the math says that ratios, such as the price/earnings (p/e) ratio, will remain the same. Price per share and earnings per share both split the same way.

Investors looking at charts will also notice that historical volume will change according to the split ratio, although in reverse. In other words, a stock that traded 1000 shares on a given day in the past later undergoes a two for one split. Looking at a split-adjusted chart after the split occurs will show 2000 shares at ahlf the price for that same day. Again, the dollar value of the shares traded that day will remain the same.

While split adjust usually refers to stock prices, options on underlying split stocks are also split-adjusted by increasing the number of shares covered by the terms of the option. This conversion is done by the same split ratio as the underlying shares, and the strike price is divided by the split ratio. This is also the reason you might see fractional options stike prices following stock splits.

  1. Reverse Stock Split

    A reverse stock split is a corporate action in which a company ...
  2. Adjustment in Conversion Terms

    A term used to describe the adjustment made to a convertible ...
  3. Outstanding Shares

    Outstanding shares refer to a company's stock currently held ...
  4. Split Limits

    Split Limits is a provision of an insurance policy that states ...
  5. Do Not Increase - DNI

    Do Not Increase is an instruction on a GTC buy-limit or stop ...
  6. Return Of Capital

    A return from an investment that is not considered income. The ...
Related Articles
  1. Investing

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  2. Investing

    If You Had Invested In NVIDIA Right After Its IPO

    A $2,000 investment would have grown to nearly $275,000 since Nvidia's IPO in 1999
  3. Insights

    Amazon Hits $1000

    Amazon.com Inc. has hit $1000 per share, but don't expect CEO Jeff Bezos to approve a split.
  4. Investing

    Galena Declares 1-for-20 Reverse Split (GALE)

    Galena’s 1-for-20 reverse stock split goes ex-today, which will bump the share price by a factor of 20.
  5. Investing

    The Highest Priced Stocks In America

    These stocks don't come without a hefty price tag. But are they worth it?
  6. Investing

    If You Had Invested Right After AT&T's IPO (T)

    Analyze how AT&T stock has performed after the company's 1984 IPO, and learn how you would have fared had you been an early investor.
  7. Investing

    If You Had Invested Right After JPMorgan's IPO (JPM)

    Find out how much your investment would be worth in 2016 if you had purchased 100 shares during JPMorgan's IPO, including the impact of dividends and splits.
  8. Investing

    GTx Declares 1-For-10 Reverse Stock Split (GTXI)

    Nasdaq’s minimum $1-per-share bid requirements for continued listing has forced GTx to declare a reverse stock split.
  9. Investing

    Under Armour Splits Stock Two-for-One (UA)

    On its own, the split is purely cosmetic and means nothing, given how well Under Armour has performed amid persistent competitive pressure.
  10. Investing

    If You Had Invested in Walmart Right After Its IPO (WMT)

    Discover the value of your shares in 2015 if you had purchased 100 shares of Wal-Mart Stores, Inc. at its initial public offering (IPO) price.
  1. What Is a Split-Adjusted Share Price?

    Comparing split-adjusted share prices properly can help reflect accurate performance. Read Answer >>
  2. Does a stock split lead to the gapping up/down of the stock?

    If a company splits its stock, there will be no gapping of the stock due to the split itself. A stock split does not materially ... Read Answer >>
  3. How do mutual funds split?

    Learn when mutual funds split their shares and why this practice is primarily a marketing tactic aimed at encouraging investors ... Read Answer >>
  4. Does a stock split make a better investment?

    Learn why a stock split doesn't make a difference to an investor's equity and the main reason why companies choose to split ... Read Answer >>
Hot Definitions
  1. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  2. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  3. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  4. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  5. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  6. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
Trading Center