This has been an action-packed year for Time Warner (NYSE:TWX.DL) and its stock. July saw the company's share price surge on news that Twenty-First Century Fox was shooting for an $80 billion purchase of its multimedia competitor at $85 per share. An early August announcement that such a move was no longer under consideration then prompted Warner's share price to dip, only to regain some ground on strong performance from HBO and Warner's announcement that it would orchestrate an additional $5 billion in share repurchases. Today, the stock trades roughly 17% higher than it did at the beginning of the year, promoting scrutiny as to whether buying its own shares is smart at current levels.

TWX Chart

TWX data by YCharts

Time Warner had previously announced a $5 billion share repurchase initiative in February and had carried out $3.5 billion in buybacks as of Aug. 1. All told, this leaves the company with authorization for $6.5 billion in share repurchases. Warner has also paid out roughly $500 million in dividends in this year, boasting a yield that compares favorably with other companies in its industry.

The new buyback push might start to look a bit heavy in light of the company's roughly $2 billion in operating cash flow through the first half of its fiscal year, $3.8 billion in planned annual capital expenditures over the next three years, and roughly $18 billion net debt. Are Time Warner's buyback plans in the best interest of the company and its long-term shareholders?

Media companies are on a repurchasing spree
At least part of Time Warner's recent $5 billion repurchase authorization comes down to assuring investors that the future looks bright, and that the company is sufficiently sized and scaled. Rupert Murdoch's abandoned push to acquire the company prompted some unease among shareholders, and though Warner's management has shown little interest in discussing Fox's buy attempt, at least some of the new plan to reduce shares can be taken as a reaction to the move.

New buyback initiatives were common among media companies in early August. Fox followed up the withdrawal of its purchase offer with news that it would repurchase $6 billion worth of its own shares, while CBS also raised its repurchase outlay from $3 billion to $6 billion. The flirtation with near-term consolidation seems to have abated somewhat, and multimedia companies are hunkering down and projecting strength for the future.

Is Time Warner repurchasing at good levels?
Even though shares now trade at relatively high prices, Time Warner's stock appears to be cheap relative to its main competitors. The company has a trailing price-to-earnings ratio of 16.7, while CBS has a P/E value of 17.4 and Disney is priced at roughly 21.1 times trailing earnings. Twenty-First Century Fox has a trailing P/E value of 19.4.

What's more, Warner looks to have strong growth potential as it expands HBO Go and online content licensing deals. Factor in the benefits from growth in international markets and the company's vast array of media properties, and its fundamentals start to look quite solid. The last quarter saw the company increase its adjusted operating income by 17%, and CEO Jeff Bewkes recently promised to double earnings growth over the next several years. The company expects this year's earnings per share to see low-teens growth over 2013's figure of $3.51.

TWX Shares Outstanding Chart

TWX Shares Outstanding data by YCharts

Increasing online content distribution, expanding foreign markets, and a strong media slate present Warner with avenues for continued success. As a result of growth and stock buybacks, Warner projects that adjusted EPS will reach $6 in 2016 and $8 for 2018. If it can deliver on these targets, shareholders should have plenty of reasons to feel good about the repurchase. 

Will HBO continue to spearhead growth?
The success of Time Warner's bid for substantial growth and raised earnings depends heavily on the future of HBO. The platform is at the top of its game in terms of content production, with hit series such as Game of Thrones, True Detective, and Silicon Valley winning critical acclaim and helping to drive subscriptions. Yet the service is still having trouble climbing significantly above the 30 million subscriber level, while Netflix, a relative newcomer to the content space, has already surpassed 37 million subscribers.

That doesn't tell the whole story of the increasing competition between the services, but it does highlight the potential inherent to offering an over-the-top version of HBO Go. The in-development OTT service isn't guaranteed to deliver a massive win for Warner, as how the new product will affect the traditional cable subscription model and content licensing deals with companies such as remains unclear, but there is significant promise in the move.

Foolish thoughts
Even though Time Warner will be repurchasing its stock at historically high price levels, the move looks to be a sensible one for the company and its shareholders. Fox's unsolicited push to acquire the company and a broader trend of repurchases among media conglomerates applied some pressure for the latest authorization, but Time Warner also has strong assets and growth prospects. 

Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends and owns shares of, Apple, Google (A and C shares), Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.