My thoughts on buybacks
$Alphabet-C (GOOG.US)$ $Meta Platforms (FB.US)$ $Microsoft (MSFT.US)$ Share repurchase programs have always had their advantages and disadvantages for company management and shareholders alike. But as their frequency has increased in recent years, the actual value of stock buybacks has come into question. Some corporate finance analysts feel that companies use them as a disingenuous method to inflate certain financial ratios, such as EPS under the auspices of providing a benefit to shareholders. Stock buybacks also enable companies to put upward pressure on share prices by affecting a sudden decrease in their supply.
Investors shouldn't judge a stock based solely on the company's buyback program, though it is worth looking at when you're considering investing. A company that repurchases its own shares too aggressively might well be reckless in other areas, while a company that repurchases shares only under the most stringent of circumstances (unreasonably low share price, stock not very closely held) is more likely to have its shareholders’ best interests at heart truly.
You should remember also to focus on the stalwarts of steady growth, price as a reasonable multiple of earnings, and adaptability. That way, you'll have a better chance of participating in value creation versus value extraction.
Some experts contend that buybacks at current high market levels cause the company to overpay for the stock and are carried out to placate large shareholders. For clients who invest in individual stocks, a knowledgeable financial advisor can help analyze the longer-term prospects of a given stock and can look beyond such short-term corporate actions to realize the actual value of the firm.
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