It looks like Mamma.com
It's a good move for the online search specialist. The company closed out the March quarter with $2.24 a share in cash. After posting a $0.07 per share loss during the period on a 24% dip in revenues, it was time for Mamma to put its money where it fundamentals weren't.
This isn't Google
However, like most search providers, the company's billable ad space isn't worthless. It was just a matter of pricing Mamma accordingly. Once the company's market cap started approaching its liquidity, well, buying back its own stock just made sense.
For investors, there is a share buyback lesson here. Mamma first announced that it would be repurchasing up to 600,000 shares back in September. It didn't get cracking on that front until June. That's why it's important to take buyback press releases with a grain of salt. Companies aren't obliged to carry them out.
One also has to be cautious when evaluating a repurchase plan's impact on dilution. Yes, Mamma has repurchased a little more than 300,000 shares this month, but its shares outstanding have actually grown by 2.2 million over the past year. Over the past two years, the company has printed more than 6 million new shares.
Hopefully, this month's buying binge means that Mamma is done with its spendthrift ways when it comes to issuing new stock. If not, well, the question becomes just how much of Mamma can Mamma sell itself?
Some more stories that Mamma used to tell:
- The firm's delayed March quarter was a soft one.
- Then again, maybe that's why this Mamma eventually scared away Mark Cuban.
- At least it seems to be getting over its liberal share-diluting ways.
Longtime Fool contributor Rick Munarriz loves his mamma. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.