Stock buybacks are generally considered a bullish signal on Wall Street. They 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 investing community's preferred picks. If companies announce stock buybacks and CAPS' top investors endorse their future prospects, Fools should take notice.
Here are some of the latest companies to announce share repurchase programs.
|
Company |
Buyback Announcement Date |
Amount of Buyback |
CAPS Rating (out of 5) |
|---|---|---|---|
|
Home Depot (NYSE:HD) |
6/19/2007 |
$22.5 billion |
** |
|
Symantec (NASDAQ:SYMC) |
6/14/2007 |
$2 billion |
** |
|
Logitech International (NASDAQ:LOGI) |
6/19/2007 |
$250 million |
***** |
|
Staples (NASDAQ:SPLS) |
6/14/2007 |
$1.5 billion |
**** |
|
Expedia (NASDAQ:EXPE) |
6/19/2007 |
$3.5 billion |
** |
The CAPS advantage
Investors don't feel particularly positive about the chances of this group of companies beating the market as they were with last week's crop, which received more favorable ratings from the 30,000 members of CAPS. Only computer peripheral maker Logitech was able to generate a five-star rating, although office supplies supplier Staples got close with four stars.
One third of the investors on CAPS who have weighed in with their opinion on Logitech are considered All-Stars -- top-rated players who consistently outperform their peers.
• CAPS player WyattKaldenberg argues, "LOGI is the leaders in PC and electronic device (like MP3 players and video game) accessories. They dominate in webcams and PC speakers markets. Their push to control the remote control device market should bring in money for years."
• That sentiment is echoed by han810p, who sees Logitech as being a leader in one particular market that has phenomenal growth prospects. "Good numbers, but on top of that, they OEM most of the controllers for video games. An entire generation coming up in college is totally hooked. They soon be earning and spending on (what else) better gaming. And from a technical look, Logitech makes some of the best."
While support for Logitech isn't universal, akazakoff has ventured a bearish opinion believing the stock is overpriced. He writes simply, "Logitech is too expensive at its current price." Yet there's the competition to consider, too. Sony (NYSE:SNE) remains one of the primary adversaries in the game controller market, while Microsoft (NASDAQ:MSFT) has its own line of peripherals.
What's your take? Is the PC market still growing enough to allow Logitech to expand, or is the gaming market what will become the main source of revenues?
Foolish fallout
Now it's time to add your voice. Bull or bear, Motley Fool CAPS is a completely free, fun service where you can pit your intellect against thousands of your fellow investors. Click here to sign up today.
Home Depot, Microsoft, and Symantec are all recommendations of Motley Fool Inside Value. A 30-day free trial let's you see the value inherent in these stocks just like their buybacks indicate they are.
Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
