There is a belief that share buyback is
- akin to giving dividend to shareholders.
- Managers perceives shares as undervalued
Share buyback may not be always good!
As an investor myself, I do not think share buyback is always good. In my opinion, it is only good if the company is growing, i.e. revenue AND profit. It is bad if Managers are earning big pay but delivering mediocre business performance and using the misleading rising EPS to mask their incapability.
My Observation
I noticed quite a number of Singapore listed companies lately like to embark on share buyback spree. However their revenue, profit performance has been miserable. On the annual report, it may boast the rising EPS, but if you read (perhaps dig it) it more carefully, the net profit remains stagnant for years. For such company, investors really need to think twice before investing.
In such cases, I would prefer them to distribute the extra cash to the shareholders instead of share buyback.
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