Share buyback authorizations are useful indicators to stay aware of. Share buybacks are often thought of as an indirect return of capital to shareholders. When a company buys back its shares, it lowers the number of outstanding shares. All else being equal, this increases earnings per share (EPS), which often leads to higher stock prices. They can also indicate that management has confidence in the state of the company. The company must buy shares in the market. They likely wouldn't do so if they believe their shares are overvalued.
However, excessive buyback activity can be a bad thing. It can indicate that the company lacks investment opportunities to grow the business and sees buybacks as its best use of capital. Larger buyback programs make more sense at mature firms that are ultimately looking to reward shareholders. It is important to note that a share buyback authorization does not guarantee the company will proceed with it. Below, I’ll detail four firms that have recently announced significant buyback authorizations. All market capitalization figures are as of the Dec. 9 close.
