Valuation vs Price, page-82

You should never back it out as it's an expense that reduces the eps for shareholders. It is also an excellent measure of how much control the employees or an employee major shareholder has over the company Vs shareholders.

Too much control and you see very fat ESP's that move all the profit from shareholders to those running the company or the major shareholder who can use it as a private piggy bank. You want enough to keep key people but the overall share count should be relatively static with low buyback levels.

You also don't want heavy buybacks as these deliver value to option holders rather than only existing shareholders with dividends. Buybacks can be a warning that employees are pumping up their option value by hiding all the dilution from excessive share based compensation.

Just my opinion based on first hand experience with these things... don't rely on me.