Stock buybacks are generally considered a bullish signal on Wall Street. They often announce management's belief that its company's stock is cheap and that its own shares will provide its best return on investment. Like dividends, buybacks also let companies return capital to shareholders.

How buybacks work
Done right, share repurchases will increase earnings per share, as long as profits stay at least at the same level. A company with $1 million in earnings and 1 million shares outstanding will have earnings per share of $1. Now, if it buys back 250,000 shares and leaves only 750,000 shares outstanding -- and total profits remain $1 million -- its new EPS would be $1.33, or $1 million divided by 750,000.

We're seeking companies that have announced stock-buyback programs. Then we'll head over to Motley Fool CAPS to get some insight into the 70,000-strong investor community's preferred picks. If companies announce stock buybacks, and CAPS' top investors endorse their future prospects, Fools should take notice.

Here are some of the latest companies to announce share-repurchase programs.


Buyback Announcement Date

Amount of Buyback

CAPS Rating (Out of 5)

Ship Finance International (NYSE:SFL)


7 million shares


First Horizon National (NYSE:FHN)


7.5 million shares


Black & Decker (NYSE:BDK)


4 million shares






Hartmarx (NYSE:HMX)


3 million shares


Sources: Company press releases, Motley Fool CAPS.

The CAPS Advantage
Investors at CAPS seem to have pretty dour opinion of this group of companies announcing buyback programs -- only one of the five garners anything above the average three-star rating.

Bermuda-based oil-tanker operator Ship Finance International is the CAPS favorite here. This spinoff of Frontline (NYSE:FRO) has been slowly selling off its single-hull fleet and has cut its share down to nine such ships, half the number it had last year. It trades at two-thirds of the multiple that industry leader Teekay (NYSE:TK) sports, yet at 8.3%, it pays a yield about eight times greater than that of its rival.

Top-rated All-Star SokorScout notes that this company has consistently outperformed since it was spun off and should continue to do so because of conservative management.

When [Frontline] let this little birdie out of the nest, all it has done since is fly. ... This operation manages, leases, [and] finances the [building] and repairing of ships. [It] has double-hull, dry cargo, and several special use ships that are deployed for use, even before they are built [or] taken in to be rehabilitated or retrofitted. SFL appears to be financially more conservative, but aggressively operated. ... It is my prediction that this recently liberated typhoon will soon lead the pack.

If there are any doubts about this company, it seems that they involve macroeconomic factors more than issues specific to Ship Finance. For that reason, we could see current CAPS investor bear DaveOfDuke become a bull next year: "The analyst expects tanker rates to even out throughout the rest of the year, and then to turn around in 2008 and 2009," he writes.

With the company's shares trading at a 15% discount to their 52-week high, possibly fueled in part by a drop in shipping rates, management seems to think its stock is cheap.

Foolish fallout
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.