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Strategies & Market Trends : Value Investing
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To: scbeachbum who wrote (78604)11/25/2025 4:13:43 PM
From: bruwin   of 78744
 
I think it must be borne in mind that when a company buys back its shares one of the main reasons it does so is to Increase the "E" in its P/E ratio because E = Earnings/Shares and when the numbers of "Shares" available goes down "E" increases and the P/E ratio declines, if "P" remains much the same. which is always attractive to buyers of a company's shares.

Needless to say, the P/E ratio of a company is not the only criteria by which a company should be evaluated. It must be borne in mind that the SHARE CAPITAL number on the Balance Sheet will inevitably be reduced when there's Share buy backs, based on the Balance Sheet equation of :-

SHARE CAPITAL + RETAINED INCOME = TOTAL ASSETS - TOTAL LIABILITIES.

When that happens TOTAL LIABILITIES increase relative to TOTAL ASSETS, which, in itself, is not a positive outcome.
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