Many companies have shares on the market and a solid financial strategy to follow. When a company decides to repurchase its shares, there are several reasons behind the decision. Although employees might think that if the company has extra cash to go around, then the employees should benefit from the situation and receive a raise.
However, a share buyback also benefits employees because it increases the stock value of the shares and it reduces the numbers of investors or shareholders.
When is the best moment for a share repurchase?
Investment specialists agree that any company must wait for the right time to buy back shares from the market. This decision should be made if the company is profitable and has enough cash. In addition, the state of the market is crucial.
If a company pays more for its shares, then there are no benefits. The stock market should be on the low to not pay more for the shares.
Companies who successfully bought back shares
A recent article by Lawrence A. Cunningham, professor at George Washington University, writer and founder of a boutiques consultancy: Quality Shareholders Group, presents companies that have successfully used buyback principles.
On the list, there are several companies that managed to repurchase their own shares successfully. Again, for the operation to succeed, the stock market needs to be in a downfall, and the company should have extra cash.
The list is long
CDW, an IT company with $20 billion in revenue, is an excellent example of a company that reinvests and repurchases its shares. O’Reilly is an auto retailer founded in 1957, and it has an annual revenue of $10 billion. Although founded in 1957, after 1993, the company has started to encourage employees to own their stocks at the company and encourage cash flows.
Other examples include: NVR, Adobe, Assurant, and the list goes on.