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Many companies will have splits of their stock (either forward or reverse).
However, when looking at the before and after prices, a raw analysis of the graph would look like the stock lost half its value (for example with a 2:1 split), whereas in reality, every stockholder's overall value has remained unchanged but the number of shares they have has increased.
What is the best way to graph the historical performance of a particular stock that will also factor-in forward and reverse splits?
One way that is common is to show the value over time of an initial investment, say $10,000. The advantage of this is that it doesn't show stock price at all, so handles splits well. It can also take into account dividend reinvestment. Fidelity uses this for their mutual funds, as can be seen here. Another option would be to compute the stock price as if the split didn't happen. So if a stock does a 2:1 split, you show double the actual price starting at that point.
