Buying back shares at this stage in their corporate development would rightly be interpreted as a cynical attempt to manipulate share prices. The most relevant question concerning implementaion of share buybacks is not: Have the shares gone down?, but rather:
IS THIS THE BEST PLACE TO INVEST CORPORATE FUNDS?
Take IBM. with shares trading at a low multiple of earnings (10x) or so, IBM theorectically gets a return on 10% of share buybacks, which is lower than ROE (25%), but IBM does not need more equity, so it still makes sense.
Cymer has a trailing pe pf 88.79, according to bloomberg, meaning the return on a share buyback iss 1. something %, while ROE is 16.91%. given this, and given their incredible need for cash, buying back stock would be a very reckless use of funds. companies who buy back shares are saying "we cannot grow the business." for cymer to say this would be a diaster, given their pe. |
