Stock buybacks are generally considered a bullish signal on Wall Street. They often announce management's belief that its stock is cheap and that its own shares will provide its best return on investment. Like dividends, buybacks also let companies return capital to shareholders.

How buybacks work
Done right, share repurchases will increase earnings per share, as long as profits stay at least at the same level. A company with $1 million in earnings and 1 million shares outstanding will have EPS of $1. Now, if it buys back 250,000 shares, leaving only 750,000 shares outstanding -- and total profits remain $1 million -- its new EPS would be $1.33, or $1 million divided by 750,000.

We're seeking companies that have announced stock buyback programs. Then we'll head over to Motley Fool CAPS to get some insight into the 65,000-strong investor community's preferred picks. If companies announce stock buybacks, and CAPS's top investors endorse their future prospects, Fools should take notice.

Here are some of the latest companies to announce share repurchase programs:


Announcement Date

of Buyback

CAPS Rating
(out of 5)

ConAgra Foods (NYSE:CAG)


$500 million


NutriSystem (NASDAQ:NTRI)


$100 million


PNC Financial Services (NYSE:PNC)


25 million shares


Dollar Tree (NASDAQ:DLTR)


$500 million




20 million shares


Sources: Company press releases; Motley Fool CAPS.

The CAPS advantage
Investors at CAPS have a pretty lackluster opinion about this group of companies announcing buyback programs, with four of the five companies earning average or lower ratings.

Many companies, such as Dollar Tree, are making use of accelerated share repurchases, which allow a company to buy back its shares immediately from an investment bank, which in turn borrows the shares it sells to the company. The institution then buys shares in the open market over time to close its short position. The company is able to retire those shares immediately, not having to extend its buyback over the entire length of the program. It also eliminates the risk of changing business conditions that could force an early termination of a buyback. The minimum and maximum amounts are set by a "collar."

The problem with such buybacks is that they can be deceptive. By retiring shares right away, a company gets an immediate EPS boost, but because the investment bank that sold the shares to the company is buying them back over time, the company ends up paying the investment bank the difference if the share price rises. A buyback program could end up costing more than if it had been conducted on the open market.

Some $30 billion worth of ASRs were completed last year by companies such as Wendy's (NYSE:WEN) and Motorola (NYSE:MOT).

Investors have given their highest favor this week to salvage auctioneer Copart, which buys junked cars and sells them to remodelers, scrap metal shops, and parts dealers, increasingly through a proprietary online auction system. Its directors approved increasing the number of shares being bought back under an existing program by an additional 20 million shares.

CAPS All-Star mimosapartners sees the way we drive our cars as a reason for the company, a Motley Fool Stock Advisor recommendation, to continue its success.

Our knack for totaling cars and trucks does not appear to be on the decline. And the longer we hold onto them the more likely they will be totaled when we crash them. This is a stock with a future. Financials don't look too bad either. There is a lingering lawsuit which seems to be common denominator with aggressive, successful companies.

Copart has begun international expansion, and with a recent acquisition, it's now the largest salvage yard operator in the United Kingdom with as much as 25% of the market. It says it will soon convert all the in-person auctions there to online auctions and should be able to squeeze out extra margins in the process.

Foolish fallout
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.