This morning Jack in the Box
Share repurchases are interesting beasts. On the surface, they're often thought to be good no matter what since the number of shares outstanding is reduced. But a better way to look at a share repurchase is like any other investment a company can make, and cash should always flow to the investments with the most attractive returns.
Companies such as Limited Brands
It's not as clear, however, that the repurchase will add a great deal of value for shareholders. Over the past few years, Jack in the Box has failed to deliver returns on capital above 10%, and from a valuation perspective, I have a tough time defining Jack in the Box shares as undervalued or attractively priced, unless I assume the company will see an improvement in margins from its efforts to continue franchising a larger portion of its stores and make operational improvements.
It's entirely possible management and the board of directors believe that one or both of these items are going to develop soon, but given that the company competes with McDonald's
To see what else we've been saying about Jack in the box, check out:
- Jack in the Box's Record Highs
- Nice: Jack in the Box Rocks
- The Top 10 Things Overhead at the Panera/Qdoba Hearing
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At the time of publication Nathan Parmelee had no financial position in any of the companies mentioned.