Share repurchases that were recently announced could take time to occur, or might not happen at all. These announcements either add to the prior plan, or could replace the previous plan all together. In the case of MVC Capital, it is an initial announcement. intentions or results are tough to predict, essentially when the company is investing in itself.

IN PICTURES: How To Make Your First $1 Million

Company Repurchase Amount Date Announced Market Cap
Amdocs Limited (NYSE:DOX) $700 million April 22 $6.4 billion
Global Payments Inc. (NYSE:GPN) $100 million April 23 $3.6 billion
International Business Machines (NYSE:IBM) $8 billion April 27 $165 billion
MVC Capital, Inc. (NYSE:MVC) $5 million April 27 $338 million
Orbital Sciences (NYSE:ORB) $50 million April 23 $1.7 billion
Synaptics Inc. (Nasdaq:SYNA) $100 million April 22 $1.07 billion
UMB Financial Corporation (Nasdaq:UMBF) 2 million shares April 27 $1.7 billion

A company being authorized to repurchase shares is different than a company actually doing it. These companies have been given the go-ahead to reduce the number of shares outstanding. Share repurchase will adjust the book value of a company so value investors will need to stay on their toes. In the group, the lowest price to earnings is IBM (NYSE:IBM), sitting around 12, but looking into the forward P/E, IBM has a multiple of 10.5. Also digging into forward price to earnings Amdocs Ltd. (NYSE:DOX) sits around 13. Amdocs Ltd. has beat earnings estimates in each of the last four quarters, which might be why in the last week analysts, according to Thomson Financial Networks, have raised next quarter EPS estimates to 57 cents (a 1-cent increase), and full year estimates up 4 cents to $2.26. (Learn the techniques that Buffett, Lynch and other pros used to make their fortunes; check out The Value Investor's Handbook.)

Of the group, the company that has the lowest price-to-book is MVC Capital, Inc (NYSE:MVC), at 0.81. MVC Capital focuses on investing in small- and medium-sized companies, as a business development company. Share repurchases will reduce the shares outstanding, and could make the shares look overvalued. Helping MVC out is the fact that it has the highest dividend of the group, paying 3.45%, with a fairly consistent payout since 2005. Recently, it announced a renewal of a $50 million credit facility at LIBOR plus 4.5% and 1.25% LIBOR floor, which will expire April 27, 2010. The repurchase agreement has no time limit, and will occur at the price set by the market.

The Bottom Line
In the end, the company must decided what the best use of its capital is, in order to invest in its own company. This could create more value for current shareholders. It could be prompted by a steep reduction in share price, beyond what the company believes is warranted. Of the group, the company with the biggest drop in price year-to-date is Global Payments Inc. (NYSE:GPN), with a drop of 17%. IBM is down as well, with a 1.6% drop, from $130.90 to $128.82. IBM is not going to be as volatile as the $3.6 billion market cap Global Payments, and it does pay a 1.7% dividend yield. (The P/B ratio can be an easy way to determine a company's value, but it isn't magic! Read more in Value By The Book.)

Given the huge difference in motivations, ability or even intent, it will be tough to predict the effect of these announcements. Usually the company will tell you it is a sign of the management's confidence in the company. (To learn more, see How Buybacks Warp The Price-To-Book Ratio.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Economics

    Investing Opportunities as Central Banks Diverge

    After the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
  2. Stock Analysis

    The Biggest Risks of Investing in Pfizer Stock

    Learn the biggest potential risks that may affect the price of Pfizer's stock, complete with a fundamental analysis and review of other external factors.
  3. Professionals

    4 Must Watch Films and Documentaries for Accountants

    Learn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
  4. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  5. Technical Indicators

    Using Pivot Points For Predictions

    Learn one of the most common methods of finding support and resistance levels.
  6. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  7. Active Trading

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  8. Markets

    PEG Ratio Nails Down Value Stocks

    Learn how this simple calculation can help you determine a stock's earnings potential.
  9. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  10. Investing

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  1. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  2. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  3. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  4. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  5. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  6. What can working capital be used for?

    Working capital is used to cover all of a company's short-term expenses, including inventory, payments on short-term debt ... Read Full Answer >>

You May Also Like

Trading Center