Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of regional airline SkyWest
So what: SkyWest, which has struggled of late, with shares down more than 50% from five years ago, said that its buyback plan would allow for up to 6.5 million shares to be repurchased. With about 51.3 million shares outstanding, the repurchase plan represents 13% of shares, and an ambitious attempt to return capital to shareholders, sending a message that management thinks shares are undervalued.
Raymond James also upgraded the airline from "outperform" to a "strong buy," as SkyWest also announced a new contract with American Airlines to carry out short-haul flights. Raymond James is also a partner in the buyback program.
Now what: Buybacks are generally only effective when a company has no better way to spend its money and its shares are undervalued. Considering SkyWest actually posted a small loss over the past 12 months, it seems like it would be better off reinvesting in its core operations instead of spending just to pander to shareholders. This likely explains why the stock slipped after jumping out of the gate. I’d wait to see consistent profits, rather than buyback shenanigans, before investing.
Want to see if SkyWest can fly higher? Just add SkyWest to your Watchlist.
Fool contributor Jeremy Bowman holds no positions in the companies in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services
More from The Motley Fool
These 3 Stocks Have Doubled Their Dividends
Find out why these companies rewarded their shareholders.
Why Gold Fields International, SkyWest, and Applied Optoelectronics Jumped Today
The market fell, but these stocks rose. Find out why.
This Airline Stock Nearly Doubled in 2016: Now It's Overvalued
SkyWest has executed a successful turnaround over the past two years. However, investors may be a little too excited about its recent earnings growth.