Buyback (Share Repurchase)
A company buying and retiring its own shares — reducing the share count to raise per-share value, a form of shareholder return.
In plain terms
When a company uses its earnings to buy back its own shares from the market and retire them, that is a buyback.
Just as cutting a pizza of the same size into fewer slices makes each slice bigger, fewer shares make each remaining share's portion (of profit and assets) larger. So along with dividends it is a leading way to return value to shareholders.
What it tells you
It can also be read as a signal that the company judged "our stock is worth buying right now."
Checking whether shares outstanding actually fell by the amount bought back tells you whether that return truly carried through to per-share value.
Formula
buyback amount (TTM) read together with the year-over-year change in shares outstanding
What high or low means
When a buyback actually reduces shares outstanding, it is read as a shareholder return that enlarges each share's portion.
When buybacks do not reduce the share count (offset by employee stock compensation), the return effect is weak.
Buybacks are not always good. Buying back when the stock is expensive means the company is spending its money dearly.
When a company buys back to fill the share count swollen by stock given to employees (SBC), an apparent return amounts in reality to just offsetting dilution. Look at it together with SBC and the change in share count to tell a real return from dilution offset.
Buying back stock with borrowed money can weaken the balance sheet and warrants caution.
In the 2010s, major US airlines poured much of the free cash they earned into buying back their own shares, in the name of supporting the stock and returning value to shareholders.
Then when COVID halted air travel in 2020, their cash ran dry and they ended up asking the government for tens of billions of dollars in bailouts. They drew sharp criticism along the lines of "you spent all your crisis-buffer cash on buybacks." It was a case showing that buybacks are not always a good return — the use and timing of that money matter.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Buyback and other financial metrics alongside the sector average.
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.