Stock Buybacks/Repurchase
Stock buybacks or repurchase is exercised by companies for a variety of reasons including to increase EPS, undervalued stock, mergers, takeovers, acquisitions, and stock options. Over the past few years, companies have been buying back stocks in record-breaking figures. An example of a company that has recently exercised stock buyback or repurchase is Apple Inc., which recently launched a $300 billion stock buyback program. In the 2017 financial year, Apple repurchased some of its stocks from shareholders through privately negotiated and/or open market transactions. Apple’s stock repurchases program has been influenced by various factors in relation to enhancing the firm’s profitability and growth. First, the company launched this program to help buyback undervalued stocks or shares. Apple considered stock repurchase as an ideal measure toward scooping up its undervalued shares (Shen, 2017). Secondly, Apple engaged in stock buyback in 2017 to help boost its EPS and enhance shareholder value across all its operations.
In light of the reasons of the stock buybacks and its impact on the company’s profitability, Apple made a good choice. Despite being one of the leading technological firms worldwide, the firm’s stocks have remained relatively cheaper in the wider market. Apple’s profit...
It’s estimated that Apple’s P/E multiples are at 19 times current earnings and 14 times forward earnings in comparison to S&P 500’s 25 times earnings (Tonner, 2017). Therefore, Apple made a good decision to help boost its P/E multiples through stock repurchases that are geared toward recapturing undervalued stocks, lessening shares outstanding, and enhancing EPS.
One of the observations from analysis of Apple’s financial statements and/or footnotes, the stock repurchase program in May 2017 was a continuation of a program that had earlier been launched by the company. In this regard, the May 2017 announcement was an indication of Apple’s commitment to increase its share repurchase from $175 billion to $210 billion. This implies that the company was seeking to enhance the benefits associated with stock buybacks/repurchases with respect to scooping up undervalued shares and boosting EPS. The second observation from Apple’s financial statements and/or footnotes is that the total open market common stock repurchases in 2016 exceeded those of 2017. There was a slight decline in the total common stock repurchases in 2017 in comparison to 2017 i.e. from 167,567 to 134,832. Therefore, the company had more stock…
