The value of share buybacks

When companies buy back their own stock, they can usually expect the capital markets to reward them with an increase in their share price.

But buybacks don't increase a company's intrinsic value.

Any mechanical increase in earnings per share will likely be offset by a reduction in the company's price-to-earnings ratio.

Share buybacks are often most valuable not for their effect on EPS, but for the messages they send to the markets.

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