This piece is approved to use with clients.
Both Sides of the Buyback Debate
- Share buybacks (along with the Fed’s QE) have been an easy scapegoat for the bears, but few of them have been able to actually quantify the effects of these buybacks.
- While buybacks likely have inflated companies’ earnings per share—and may even have led to some misallocation of capital—the counterpoint is that many buybacks are the result of robust free cash flow.
- Once we consider the value of returning this excess cash to shareholders, I find it plausible that stocks are actually undervalued instead of overvalued as of April 30, 2019.
This report is available as a PDF. To read the full report click the button above to open the report.