Investing 101: Which Companies Are Buying Back Their Own Stock?

Lowe's Corporation (NYSE: LOW  ) , the second largest U.S. home improvement chain, recently announced its intentions to set aside $5 billion to buy back its shares over the next two to three years. Lowe's isn't alone. Home Depot, their chief competitor, announced a $1 billion share buyback in late March.

Buybacks, or share repurchases, are when a company starts to purchase its own stock, taking it off the market. Doing so lessens the number of outstanding shares held by the public. The buying pressure tends to increase the value of the shares, as does the fact that there are now fewer shares outstanding.

Another side effect: Given the decreased number of shares, earnings per share will increase if profits remain unchanged.

Lowe's stock has fallen 23% this year and buybacks are expected to lessen the hit. $5 billion in buybacks currently represents about a fifth of the market share. If Lowe's shares are currently undervalued, a rally in company profits will mean strong return on investments for the firm.

Lastly, buying up stocks reduces the cash lying around the company. Having cash tied up in equities can look more attractive on a company's balance sheet and make it less attractive of a takeover target. (Free cash transfers to the acquiring company. This essentially lowers the actual cost of acquisition.)

It should be noted that companies are no better than the average investors at repurchasing their own stocks with the "buy low, sell high" mentality.

Interested in analyzing the buyback scene?

We list below some of the big companies that recently announced buybacks. Do you think there are any undervalued names among them? (Click here to access a list of free, interactive tools to analyze these ideas.)

1. AECOM Technology (NYSE: ACM  ) : Technical Services Industry. Market cap of $2.27B. Current price at $18.98. ACM recently set aside $200 million for share buybacks. The stock is currently stuck in a downtrend, trading -12.41% below its SMA20, -23.69% below its SMA50, and -29.7% below its SMA200. The stock has performed poorly over the last month, losing 28.4%.

2. Cognizant Technology Solutions (Nasdaq: CTSH  ) : Business Software & Services Industry. Market cap of $17.15B. Current price at $56.47. CTSH recently set aside $300 million for share buybacks. The stock is currently stuck in a downtrend, trading -14.53% below its SMA20, -19.31% below its SMA50, and -22.91% below its SMA200. It's been a rough couple of days for the stock, losing 11.67% over the last week.

3. Corrections Corporation of America (NYSE: CXW  ) : Management Services Industry. Market cap of $2.19B. Current price at $20.42. CXW recently set aside $150 million for share buybacks. The stock has lost 2.81% over the last year.

4. Forest Laboratories (NYSE: FRX  ) : Drug Manufacturers Industry. Market cap of $9.0B. Current price at $32.79. FRX recently set aside $350 million for share buybacks. The stock has performed poorly over the last month, losing 14.9%.

5. Henry Schein (Nasdaq: HSIC  ) : Medical Equipment Wholesale Industry. Market cap of $5.62B. Current price at $60.86. HSIC recently set aside $200 million for share buybacks. The stock is currently stuck in a downtrend, trading -5.23% below its SMA20, -11.48% below its SMA50, and -8.84% below its SMA200. It's been a rough couple of days for the stock, losing 5.14% over the last week.

6. Marsh & McLennan Companies (NYSE: MMC  ) : Insurance Brokers Industry. Market cap of $14.95B. Current price at $27.6. MMC recently set aside $500 million for share buybacks. The stock has gained 21.32% over the last year.

7. Maxim Integrated Products (Nasdaq: MXIM  ) : Semiconductor Line Industry. Market cap of $6.44B. Current price at $21.86. MYGN recently set aside $200 million for share buybacks. Might be undervalued at current levels, with a PEG ratio at 0.78, and P/FCF ratio at 14.75. The stock has gained 37.23% over the last year.

8. Myriad Genetics (Nasdaq: MYGN  ) : Research Services Industry. Market cap of $1.58B. Current price at $18.6. MZIM recently set aside $750 million for share buybacks. The stock is a short squeeze candidate, with a short float at 6.51% (equivalent to 5.41 days of average volume). The stock is currently stuck in a downtrend, trading -6.27% below its SMA20, -15.04% below its SMA50, and -13.22% below its SMA200. The stock has performed poorly over the last month, losing 20.27%.

9. Riverbed Technology (Nasdaq: RVBD  ) : Networking & Communication Devices Industry. Market cap of $3.17B. Current price at $20.37. RVBD recently set aside $150 million for share buybacks. The stock is currently stuck in a downtrend, trading -22.32% below its SMA20, -37.2% below its SMA50, and -42.27% below its SMA200. It's been a rough couple of days for the stock, losing 22.04% over the last week.

10. Westlake Chemical (NYSE: WLK  ) : Specialty Chemicals Industry. Market cap of $2.54B. Current price at $38.2. WLK recently set aside $100 million for share buybacks. The stock is a short squeeze candidate, with a short float at 15.16% (equivalent to 5.14 days of average volume). The stock is currently stuck in a downtrend, trading -14.61% below its SMA20, -22.06% below its SMA50, and -20.86% below its SMA200. It's been a rough couple of days for the stock, losing 12.02% over the last week.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Becca Lipman does not own any of the shares mentioned above. Data sourced from Finviz.

Motley Fool newsletter services have recommended buying shares of Lowe's Companies, Riverbed Technology, and Corrections Corporation of America. Motley Fool newsletter services have recommended writing covered calls in Lowe's Companies. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 25, 2011, at 9:52 AM, iamlard wrote:

    Becca,

    I think you have MXIM and MYGN text intermingled. MXIM just announced a $750 mil buyback.

  • Report this Comment On August 25, 2011, at 10:10 AM, mm5525 wrote:

    Philip Morris International (PM) has a $5 billion buyback program in 2011, up from 4 billion a year since spinoff from MO in March 2008-2010. By the end of 2011, PM will have taken $17 billion in their own shares off the market.

    I also expect PM to continue massive buybacks well beyond 2011.

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