Getting High on their Own Supply

Getting High on their Own Supply
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Getting High on their Own Supply

As corporate profit margins have started to recede from very high levels and revenue growth has continued to be sluggish, stock buybacks are now having a very significant impact on earnings per share for many companies. The era of low interest rates has also aided the buyback activity as some firms have used debt to finance the repurchase of equity. During periods when stocks generally trade at low valuations, stock buybacks have the potential to enhance shareholder returns. However, with broad equity market valuations now above historical norms and buybacks running at record levels it is not clear that the current buyback activity will be unsustainable or create long-term shareholder value.

 

 

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