Despite all the talk of constriction in the credit markets, Wall Street's buyback binge continues. Tech firms seem particularly active, with McAfee (NYSE: MFE) laying out $750 million last month, and IBM (NYSE: IBM) going whole hog on a $15 billion repurchase authorization. This morning's news revealed that Juniper Networks (Nasdaq: JNPR) wants a few of its own shares back, authorizing the repurchase of a cool $1 billion -- and promising to buy back more in the future. Which brings us to our two key questions:

Can it pay?
Absolutely. Juniper has nearly $2 billion in cash in the bank. That's enough to cover the $300 million remaining from the firm's previous buyback authorizations, the new $1 billion buyback, and more. And speaking of "more," Juniper generated free cash flow of roughly $640 million over the last 12 months. If it keeps churning out cash at that rate, further buybacks could be in the offing.

Should it pay?
But would that be a good idea? To "quality check" the Foolishness of Juniper's decision, let's see how the stock stacks up against a few of its closest competitors:

P/E

Price to Free Cash Flow

Projected Growth Rate

Juniper

42

21

21%

Alcatel-Lucent (NYSE: ALU)

n/a

n/a*

12%

Cisco (Nasdaq: CSCO)

19

15

14%

*Alcatel-Lucent has yet to file its latest cash flow statement. However, over the four quarters preceding Q4 2007, the company had negative free cash flow of euro 417 million, and so a negative P/FCF ratio as well.

Juniper's P/E makes this buyback seem overoptimistic at first glance. But if you delve deeper into the cash flow statement, you'll see that this stock is not at all as expensive as it first seems. While perhaps not a screaming bargain, the idea of paying 21 times free cash flow for a firm growing at 21% -- faster than any of its competitors -- has some merit.

Foolish takeaway
So why is it that Mr. Market is looking askance at Juniper's buyback, selling the stock off by more than 4% today? My hunch is that today's buyback isn't what's to blame -- it's tomorrow's that has investors upset. You see, Juniper promised to "initiate an on-going, share maintenance plan designed to offset dilution from the issuance of shares related to its employee stock plans."

Juniper may look cheap today, and it may be a good idea to take advantage of that cheapness by buying back shares. But if Juniper plans to undo any good that comes out of a buyback by just diluting shareholders further, then investors may be right to wonder who's reaping the benefit of these buybacks. I'm beginning to wonder, myself.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.