Definition
A share buyback (or share repurchase) occurs when a company buys its own stock from existing shareholders, typically on the open market. Buybacks reduce shares outstanding, increasing EPS and ownership percentage for remaining shareholders. Companies authorize buybacks when they believe shares are undervalued or to return excess cash to shareholders (alternative to dividends). Buybacks can also offset dilution from employee stock options. Critics argue some companies prioritize buybacks over productive investments.
Formula
Example
A company with 100 million shares and $500 million net income ($5 EPS) repurchases 10 million shares. With 90 million shares remaining, EPS rises to $5.56 without any increase in earnings.
FAQ
What is Buyback?
A company repurchasing its own shares from the open market.
How do you calculate Buyback?
A common formula for Buyback is: 新每股收益 = 净利润 / (流通股数 - 回购股数) 回购收益率 = 年度回购金额 / 市值
Why is Buyback important?
Buyback helps investors evaluate corporate actions and make more informed decisions.