CRA International Inc. (CRAI) recently approved an extension of its stock repurchase program, thereby maintaining the trend of returning wealth to its shareholders from time to time, depending on market conditions. Under this program, the company is authorized to repurchase up to $5.0 million of its common stock on top of its existing share buyback program. Earlier, in August 2011, the company's Board of Directors had allocated up to $7.5 million for common stock repurchase, which was followed by another authorization of up to $4.45 million of its common stock in February 2012. During the first six months of fiscal 2012, the company bought back 252,585 shares at an average price of $22.28 per share. As of June 30, 2012, the company had around $2.1 million available for future repurchases under its existing program.
CRA International will fund this repurchase program through cash balances. At the end of second-quarter 2012, the company had cash and cash equivalents as well as short-term investments worth $41.8 million. Shareholders' equity at the end of the quarter stood at $266.6 million. With no long-term debt burden and access to a $60.0 million credit facility, the company has adequate financial flexibility to carry out its corporate strategy.
The increase in share buyback authorization reflects the company's confidence in its fundamentals. At the same time, buying back shares will help the company in reducing the share count, thereby increasing earnings per share and return on equity.
As of August 13, 2012, the shares of CRA International were trading at $16.08. The stock has historically traded between $13.41 and $27.93 in the last 12 months. Apart from bolstering shareholders' value, this strategic move will also lift the relatively undervalued share price.
CRA International, which competes with the likes of FTI Consulting Inc. (FCN) and Navigant Consulting Inc. (NCI), currently carries a Zacks #5 Rank, which translates into a short-term Strong Sell rating. We are also maintaining our long-term Underperform recommendation on the stock.