There are a few stocks with a price per share that has risen into the four digits. These stocks look very expensive, and for certain investors, a high share price could potentially be a symbol of a company’s success. Some high-priced stocks have been outstanding performers over recent years.
However, the dollar price of a stock doesn’t tell you much about a company’s underlying value. That’s because a high share price has more to do with a company’s ownership structure than its business fundamentals.
Expensive shares might even deter investors who feel there’s limited upside for a stock. In addition, smaller investors may not be able to afford a single share of a highly-priced stock.
In this list, Forbes Advisor rounds up the 10 public companies that have the most expensive share prices on major U.S. stock exchanges.
- 10 Most Expensive Stocks of July 2024
- MicroStrategy Incorporated (MSTR)
- MercadoLibre Inc. (MELI)
- First Citizens BancShares (FCNCA)
- White Mountains Insurance (WTM)
- AutoZone Inc. (AZO)
- Chipotle Mexican Grill (CMG)
- Seaboard Corp. (SEB)
- Booking Holdings Inc. (BKNG)
- NVR, Inc. (NVR)
- Berkshire Hathaway, Inc. (BRK.A)
- Stock Prices Don’t Mean Much
- Share Price vs. Value
- Stock Splits and Expensive Stocks
- Should You Buy Expensive Stocks?
- Next Up In Investing
10 Most Expensive Stocks of July 2024
Stock Prices Don’t Mean Much
One of the biggest misconceptions among inexperienced investors is that a high share price indicates a stock is overvalued.
In reality, what matters is a company’s underlying value, which is more accurately represented by its market capitalization. Market cap is calculated by multiplying a company’s stock price by its total number of outstanding shares.
Different companies have widely different share structures, even if they have similar market caps. For example, Bank of America and Eli Lilly have similar market caps of around $300 billion—but Bank of America has more than 8.1 billion outstanding shares while Eli Lilly has only 950 million.
Stock Splits and Expensive Stocks
The list of most expensive stocks in the market mostly represents successful companies that have chosen not to implement stock splits.
A stock split increases a company’s total number of shares outstanding by a specific multiple and decreases its share price by that same multiple.
For example, a company with 1 million shares of stock worth $1,000 each may choose to implement a 2-for-1 split that would double its share count to 2 million and decrease its share price to $500.
It’s important for investors to understand that stock splits don’t inherently create any value for investors. In the case of the hypothetical stock split described above, the company’s market cap would be $1 billion both before and after the stock split.
Should You Buy Expensive Stocks?
The only difference between stocks with expensive share prices and stocks with affordable share prices is their share structure. A stock with a high share price is generally just as likely to have long-term upside potential as a stock with a low share price.
Dr. Robert Johnson, a chartered financial analyst (CFA) and professor of finance at Creighton University, says a company’s stock price should essentially be irrelevant to investors.
“What investors should be interested in is what ownership the share entitles them to. That is, as a shareholder, how much of the firm and the firm’s earning power do I own,” Johnson says.
This ownership is represented not by a stock’s share price but rather by its fundamental valuation metrics, such as P/E, price-to-sales and price-to-free cash flow ratios.
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