The S&P 500 has demonstrated remarkable performance, with gains of 24% in 2023 and 23% in 2024. Given the robust economic conditions, substantial corporate earnings and advancements in artificial intelligence (AI), analysts project continued growth for the S&P 500 in 2025.
Historical data from The Motley Fool showed the S&P has delivered positive returns 78% of the time across five decades. Following two consecutive years of 20%-plus gains, the index typically advances by approximately 12%, suggesting potential future growth.
Stock splits are experiencing a resurgence, with these corporate actions historically preceding strong financial results. Companies implementing stock splits have garnered significant investor attention, with past data indicating subsequent robust performance.
Here is an analysis of two established companies poised for potential significant gains in the current bull market.
Arista Networks
Arista Networks has demonstrated exceptional performance, with share price appreciation of 66% in the past year and 2,880% over ten years. The company executed a 4-for-1 stock split in December. Their Ethernet systems are specifically engineered for AI large language models (LLMs). Third-quarter revenue reached $1.8 billion, showing 20% year-over-year growth, whilst earnings per share rose 35%.
Despite trading at 56 times earnings, Arista’s forward price/earnings-to-growth (PEG) ratio of 0.95 suggests undervaluation relative to growth potential. The PEG ratio, particularly relevant for high-growth stocks, typically indicates undervaluation when below 1.
Palo Alto Networks
Palo Alto Networks has achieved 813% growth over the past decade. The company completed a 2-for-1 stock split in late last year. Their fiscal 2025 first-quarter results exceeded expectations, with revenue increasing 14% year-over-year to $2.1 billion and a 77% rise in EPS. Notably, next-generation security services annual recurring revenue grew by 40%.
Whilst Palo Alto’s P/E ratio of 51 might appear high, its PEG ratio of 0.15 suggests potential undervaluation considering growth prospects.
Why are stock splits useful for investors?
A stock split involves dividing existing shares into additional shares, reducing the stock price whilst maintaining overall value. Historically, stock splits have preceded positive performance.
Is Arista Networks overpriced?
Despite a high valuation at 56 times earnings, Arista’s forward PEG ratio of 0.95 suggests potential undervaluation considering growth prospects.