04-28-2015, 02:11 PM
Well yes a lot of companies are, in my opinion, spending too much on buybacks. But I don't consider it to be "manufacturing" or "artificially raising" the EPS. There is a simple logic behind it: even if earnings don't grow the pie is being split into fewer pieces. Then there is more for me. And in the end that is what I'm after.
I am a firm believer that buybacks are great if three things happen.
1. the management cannot find any smart investments to make
2. the company doesn't have too much debt
3. the current share price is not overvalued
Also keep in mind that most bigger companies would see their shares get diluted constantly (due to employee benefits, executive compensation etc) unless they were buying back shares. In these situations small share buybacks are pretty much necessary in order to keep the # of outstanding shares stable. (or preferably declining)
I am a firm believer that buybacks are great if three things happen.
1. the management cannot find any smart investments to make
2. the company doesn't have too much debt
3. the current share price is not overvalued
Also keep in mind that most bigger companies would see their shares get diluted constantly (due to employee benefits, executive compensation etc) unless they were buying back shares. In these situations small share buybacks are pretty much necessary in order to keep the # of outstanding shares stable. (or preferably declining)