Stock repurchase programs as well as dividends, are a great way to "return value to the shareholder" and also a way to "prop up" a stock price or keep funds in the game. Unfortunately, nothing lasts forever and repurchase programs are unsustainable longer term. At some point the market must heed the fundamentals, earnings growth and if margins contract, the positive effect of buybacks is lessened. This from one of my favs, Variant Perception
Stock buybacks have been an important feature of the equity rally. Companies have used low rates and easy credit to borrow money and used it to buy their own shares back. An identity for a company’s share price is: S = (revenues * margins * P/E) / # of shares. Buying back shares reduces the denominator in this equation, thus (all other things equal) boosting the stock price. But buybacks are waning; the chart below shows a 27% decline in buybacks between 1Q14 and 2Q14. YoY it is down 1.6%. (Interestingly, the peak in buybacks was also t
