Stock buybacks are generally considered a bullish signal on Wall Street. They return capital to shareholders, while declaring management's belief that its own cheap shares are its best return on investment. As long as profits remain consistent, share repurchases can even increase earnings per share, by dividing the same amount of earnings among a smaller pool of shares outstanding.

But don't forget -- a company isn't obligated to repurchase shares just because it announced its intention to do so. So don't use the announcement as a reason to buy by itself. Rather, use it as a launching pad for additional research.

More, more, more!
There was brisk trading in shares of Bristol-Myers Squibb (NYSE: BMY) on Friday, with shares pulling back from their 52-week high, after reporting late-stage liver cancer treatment brivanib failed as a first line of defense.

It marks the second failure of the therapy to successfully attack cancer in the liver. Last year it failed as a backup plan, and now its phase 3 BRISK trial indicated the drug did no better than Nexavar from Onyx Pharmaceuticals (Nasdaq: ONXX) and Bayer. Analysts noted that while disappointing, the results were not completely unexpected, since late-stage liver cancer is difficult to treat.

While management ponders what to do next with the drug, the Fool's resident pharmaceutical guru Brian Orelli still thinks there may be other indicators that brivanib may be useful for. Pfizer, for example, found its therapy Sutent was suitable for treating kidney cancer after having also failed in liver cancer trials. It ended up generating $300 million in sales last quarter, up 9% from the year-ago period.

Treating liver diseases remains a top priority for Bristol, and it continues to move forward in the hepatitis C market following its purchase of Inhibitex last year. Of course, everyone wanted to be in the hep C market as Roche bought Anadys, Gilead Sciences purchased Pharmasset, and Vertex Pharmaceuticals (Nasdaq: VRTX) partnered its drug Incivek with Johnson & Johnson subsidiary Janssen Pharmaceuticals for distribution in Europe and Mitsubishi in Japan.

Gray clouds forming?
But with Bristol's stock riding higher almost daily, maybe new disappointment was in the wings when it authorized a new $3 billion share repurchase program to be added to its current plan that had about $340 million left on it. That one was also a $3 billion plan authorized back in 2010.

The pharma's management team said it remains committed to paying its shareholders a regular dividend, which is currently at $0.34 a share each quarter and yields a healthy 3.8%. At a P/E of less than 16, BMY doesn't seem particularly expensive, though analysts are only expecting earnings to grow at an paltry 1% annually over the next five years.

Analysts forecast that the earnings report Bristol will release tomorrow will show profits tumbling 12.5% from the year-ago period and revenues falling 18%. With its top-selling blood thinner Plavix now facing generic competition (down 4% last quarter), sales will likely plunge this time around.

Running a screen play
I took to the stock screener at Motley Fool CAPS to see if I could find a drug company that offered better yields and lower multiples and had better growth prospects than Bristol. The pickin's were slim, and while GlaxoSmithKline may be an interesting stock to consider, its $3 billion purchase of Human Genome Sciences (Nasdaq: HGSI) may weigh on performance for a while.

One that did float up was PDL BioPharma (Nasdaq: PDLI), which trades at less than six times earnings, pays a dividend yielding 9%, and is expected to grow earnings at a 14% clip for the next few years. We can expect royalties PDL receives from its partners to increase in the future as analysts estimate the new deal it inked with Roche for sales of Perjeta for treating breast cancer could be worth as much as $1 billion in sales.

Better bets
Bristol-Myers Squibb has some rough patches to get over, not least of which is an SEC probe into violations of the Foreign Corrupts Practices Act. It's still riding high, but I'm expecting we'll see the stock fall further before things begin to look better.

CAPS member PoorSenator believes the pharma has a decent enough pipeline to see it through, however, and doesn't mind waiting for it to come to fruition since it does offer a similarly attractive dividend. While I agree that the dividend may make it worthwhile, investors might be able to find better stocks in and out of the industry that also offer the potential for capital appreciation. I've rated Bristol to underperform on CAPS, but I've also rated PDL BioPharma to outperform.

Tell me in the comments box below or on the Bristol-Myers Squibb CAPS page whether I'm not giving enough credit to this pharma giant.

Waste not, want not
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