A share repurchase, often known as a Buyback, occurs when a corporation buys its own existing shares in order to reduce the number of shares accessible on the open market. This has two advantages for shareholders: it can boost profits per share (EPS) and improve the value of remaining shares.When a company buys back its own stock, it reduces the number of publicly-traded shares. This increases EPS because there are now fewer shares earning profits divided by total number of outstanding shares. It also makes each remaining share more valuable because there are now fewer to compete for ownership of the company's assets and future earnings.Shareholders should always be in favor of companies buying back their stock if it is done at prices that represent good value for shareholders. Companies will often announce buybacks when they feel that their stock is undervalued, which indicates that they believe their stock offers attractive long-term prospects even at current prices.While not all buybacks result in positive returns for shareholders, studies have shown that over time they tend to outperform stocks that don't have any buyback activity."The benefits of share repurchases are clear: They can increase EPS and make remaining shares more valuable.. When a company buyback its stock, it reduces the number of publicly- traded shares - making each remaining share more valuable because there are now fewer competing for ownership of the company's as sets and future earnings. Share holders should always be in favor of companies buying back their stock if it is done at prices representing good value for investors.
