Is This Market-Thumping Stock-Split Stock a Buy Right Now With $10,000?

It's not a surprise that investors want to own companies whose stocks soar. However, an issue can arise when a business has done so well over a long period of time that its share price becomes nominally high. This makes it extremely difficult for investors with small sums of capital to buy whole shares.

Here's where a stock split comes into play (more on this below). Investors looking to put money to work in the market appreciate these rare opportunities because it could lead to strong portfolio gains. There's greater excitement surrounding a particular company.

There's one dominant retail stock that has climbed 509% just in the past decade, crushing the S&P 500 index. And it's up 14% in 2025 (as of June 10). Plus, it just put in place a massive stock split. Should you buy the business with $10,000 right now?

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Breaking down a stock split

It's important that investors first develop a basic understanding of how exactly a stock split works. Boards of directors and executive teams want shares of their companies to be accessible to the most investors, as this can grow demand. A stock split is conducted to artificially lower the stock price. On the flip side, there is a proportionate increase in the number of outstanding shares.

On March 13, O'Reilly Automotive's (NASDAQ: ORLY) board of directors voted to approve a 15-for-1 stock split. Shareholders also approved this decision, and the stock split was implemented on June 10. O'Reilly's share price went from about $1,350 to $90 overnight. O'Reilly's outstanding share count expanded by a factor of 15, while the stock price was divided by 15.

While a stock split gets a lot of attention from investors, it's worth pointing out that nothing changes with the company on a fundamental or operational basis. Undergoing a stock split won't change O'Reilly's corporate strategy, revenue, profits, or market cap. This fact can get lost in all the noise.

O'Reilly is a fantastic business

Shares of O'Reilly have significantly outperformed the broader index in the past decade. If we zoom out further, the numbers are even more impressive. Since the company's initial public offering in April 1993, the stock has skyrocketed 56,350%. This must be a wonderful business if it has taken care of its shareholders like that.

As of March 31, O'Reilly had 6,416 stores (6,298 in the U.S.) that sell aftermarket auto parts, like brakes, batteries, and motor oil, to both DIY customers and professional mechanics. What's noteworthy about this business is that demand is relatively stable. In both good and bad economic times, consumers need the stuff that O'Reilly sells. That's because having a working automobile is an urgent need for people that's not up for negotiation.

People tend to drive more in robust economic times, increasing wear and tear on cars. And when there's a recession, these consumers might hold off on buying a new vehicle, instead choosing to spend money maintaining their existing cars. This supports demand.

O'Reilly generates meaningful profits. It raked in $2 billion in free cash flow in 2024, before reporting $455 million in Q1. The leadership team has a history of plowing this cash into share buybacks. Just in the last five years, O'Reilly's diluted outstanding share count was reduced by 24%, which boosts earnings per share.

However, the valuation isn't cheap. The stock trades at a price-to-earnings ratio of 33.3. This is 38% more expensive than the trailing-10-year average. My view is that investors should wait for a pullback before adding this outstanding company to their portfolios. If you're bullish on O'Reilly, then I can understand why a dollar-cost average strategy might make sense to buy $10,000 of this stock-split stock over the next year or so.

Should you invest $1,000 in O'Reilly Automotive right now?

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.