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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.