Stock buybacks are generally a bullish signal on Wall Street as they often affirm a company’s belief that their stock is undervalued and cheap.
When buybacks are done properly, share repurchases will increase earnings per share, so long as profits stay the same. For example, a company with $1 million in earnings and 1 million shares outstanding will have earnings per share of $1. If the company decided to buy back 250,000 shares and leaves 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.
The top 5 companies chosen by The Motley Fool with planned share buybacks are listed below:
1. Ship Financial International (SFL): 7 million share buyback, announced on 10/17/2007
2. First Horizon National (FHN): 7.5 million share buyback, announced on 10/16/2007
3. Black and Decker (BDK): 4 million share buyback, announced on 10/17/2007
4. Rimage (RIMG): 500,000 share buyback, announced on 10/18/2007
5. Hartmax (HMX): 3 million share buyback, announced on 10/18/2007
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