Tuesday, March 23, 2010

Stock Repurchase Trends and Forecasts

Executive Summary: Companies as diverse as Pepsi and Intuit have stock buy back programs. Below is an effort to structure an analysis of this corporate finance mechanism, and provide a filter for someone frequently coming across news on this mechanism.

Are there explicit stock repurchase trends in the equities markets?

Can these trends be categorized by sector, geography, excutive compensation structure, company capital structure, dividend policy, need to maintain EPS and EPS guidance, competitive nature of the industry, ranking in the industry, maturity of the player or the industry, or specific macro-economic forces (say a recession) at play?

Or, are these trends and forecasts driven by the specific circumstances of a particular company, and that there is a "natural" limit to a successful, organic reinvestment of cash flows back into the company's operations? If there exists such a "natural" limit, would the company's hurdle rate be the single most important factor in decision making?

What do you think?

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