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 Chinese financial software company Longtop Financial Technologies
So what: Longtop announced that its board of directors approved a share buyback program. The authorization would let the company buy back up to $50 million in shares over the next two years. Investors tend to get excited about share buyback programs because, by reducing the company's share count, they increase profit per share.
Now what: This could be seen as a good start, but considering the amount of cash flow that Longtop's business generates and the huge amount of cash on its balance sheet, the company has room to spend a lot more than $50 million. Of course, more may be on the way after this first $50 million is put to work. Looking ahead, investors will want to keep an eye on the results of the buyback program -- while a reduction in share count can be a good thing, it's only a good use of shareholder capital if the repurchases are done at favorable prices.
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