Share Buyback (Buyback)
A company buying its own shares and retiring them — a shareholder return that reduces the share count and raises the value attached to each share.
Buyback amount (TTM), viewed together with the year-over-year change in shares outstanding
When buybacks are accompanied by an actual drop in shares outstanding, it is seen as a favorable return in which each share's portion grows.
In plain terms
When a company uses the money it earns to buy its own shares back on the market and retire them, that's called a share buyback.
Just as keeping a pizza the same size but cutting it into fewer slices makes each slice bigger, fewer shares mean a bigger share of the earnings and assets for each remaining share. That's why, along with dividends, it's one of the main ways of returning value to shareholders.
What it tells you
It can also be read as a sign that the company judged its own shares worth holding at the time.
By checking whether shares outstanding actually fell by as much as was repurchased, you can see whether that return really carried through to per-share value.
Formula
Buyback amount (TTM), viewed together with the year-over-year change in shares outstanding
What high or low means
When buybacks are accompanied by an actual drop in shares outstanding, it is seen as a favorable return in which each share's portion grows.
If the share count doesn't fall even with buybacks (because employee stock awards offset them), the return effect is weaker.
Buybacks aren't always a good thing. Buying when the share price is elevated means the company pays more with its own cash.
When buybacks exist mainly to absorb the share count increase from stock given to employees (SBC), the apparent return only offsets dilution. Looking at SBC and share-count changes together shows whether it's a real return.
When shares are bought back with borrowed money, the balance sheet weakens by that much.
Major U.S. airlines poured a large share of the free cash flow they earned in the 2010s into buying back their own stock, under the banner of supporting the share price and returning cash to shareholders.
Then in 2020, when COVID halted air travel demand, cash ran dry and they ended up asking the government for tens of billions of dollars in bailout funds. They faced sharp criticism along the lines of "didn't you spend all the cash you needed for a crisis on buybacks?" It's a case showing that buybacks aren't always a good form of return, and that the same buyback can end differently depending on timing and the company's cash position.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Share alongside the sector benchmark.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.