Despite all the talk of constriction in the credit markets, Wall Street's buyback binge continues. That's understandable when a company has plenty of cash on hand to fund its share repurchases, as we saw to be the case at Atmel earlier this week. It's almost understandable when the firm boasts free cash flow (FCF) sufficient to the purpose, as at Mattel (NYSE:MAT). But it's downright perplexing when management proposes to hit up its bankers for a loan in order to buy back its shares, as at Best Buy (NYSE:BBY).

So when hydrocarbon refiner Frontier Oil (NYSE:FTO) announced a $100 million re-up to its own buyback plan last night, my reaction was to ask: Which of the three situations applies here? Can Frontier pay its own way? And even if it can, should it? Those are the questions we'll examine today.

Can it pay?
Easily. Awash in $380 million in net cash, Frontier can finish out the $10 million remaining from its previous $200 million buyback and pay for the $100 million re-up. What's more, Frontier can do it all over again as often as it's of a mind to.

Should it pay?
At first glance, Frontier's stock price certainly looks attractive, with a price-to-earnings ratio of 9. With a second glance, you'll notice that pretty much everyone who's anyone in refining sells for a similar multiple. Your third glance will reveal that only one of these firms looks more attractively priced based on its FCF than on GAAP earnings (hint: it's not Frontier). And a peek at analysts' growth estimates suggests that we may be nearing a top in this industry. Here's how the competitors stack up:

P/E

Price-to-FCF

Projected Growth Rate

Frontier Oil

9

11

8%

Valero (NYSE:VLO)

7

9

14%

Tesoro Corp (NYSE:TSO)

7

7

5%

Alon USA (NYSE:ALJ)

9

7

9%

Western Refining (NYSE:WNR)

10

13

4%

Foolish takeaway
As cheap as Frontier looks at first glance, and as easily as it can afford its buyback, I'm not at all certain that doing so is a good idea. Not if analysts' growth projections are anywhere close to the mark. If you're an investor, encouraged by Frontier's buying of its own shares and of a mind to play follow the leader, I'd urge you to take a look at a couple of the company's competitors before doing so.

Specifically, Valero and Alon both trade at or below Frontier's multiples to earnings and free cash flow. Analysts believe both will outpace Frontier in growing their earnings and FCF. They simply look like better bargains.

Did I mention that before the old Motley Fool Select newsletter became Motley Fool Hidden Gems, Valero was on our buy list? Or that the stock has appreciated in value more than six times since then? (It was, and it did.) Find out which oil and gas stocks Hidden Gems co-analyst Bill Mann, author of the Valero pick back then, likes today. All you need to do to see his current recommendations is pick up a free trial of the service.

Fool contributor Rich Smith does not own shares of any company named above. Best Buy is a recommendation of both Stock Advisor and Inside Value. The Motley Fool has a disclosure policy.