Investors were clearly seeing the merits of owning Staar Surgical (STAA +7.50%) as the trading week came to an end. After the eyecare specialist announced a substantial share buyback program following Thursday's market close, market players were eager to snap up its shares. The company's stock finished Friday more than 7% higher.
50 million reasons to look at the stock
Staar announced that its board of directors had authorized the company to repurchase up to $50 million of its common stock.
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As is typical of such programs, Staar will buy its own equity in the open market from time to time through various means, including block purchases and structured agreements with third parties. It is not obligated to buy a certain amount of its stock at any time, and the initiative is subject to modification or suspension at its discretion.
It also has no set end date, although the healthcare company wrote that it anticipates it'll last for one year.
In the press release trumpeting the move, Staar quoted CEO Warren Foust as saying that it "reflects the confidence of the Board and management team in Staar's business progress, as well as the Company's strong balance sheet and ample free cash flow."
"It also reflects our conclusion that Staar is currently substantially undervalued, and we intend to repurchase shares at times when this dislocation exists," he added.
NASDAQ: STAA
Key Data Points
Suitable justification
Staar's recent fundamentals support a buyback. In its second quarter, the company more than doubled its net sales on a year-over-year basis, driven by growth in China, its No. 1 market. It also flipped to a headline net profit, and was sitting on a cash position of nearly $149 million.
While I've never believed share repurchases are the wisest use of a company's always-precious financial resources, I think that for a niche business like Staar, they can help attract interest in the stock and support its price. The market's bullish reaction to the news is justifiable.
