Well, yeah, if signifies that the buy back may be superior to their ROI on investing, but then again, if they think the shares are 40% undervalued, it's unlikely that they could make that much by investing the money (ROA is 11.5%).
I just think of it as a general trend, not a rule. The buy-back signifies that the company is cheap, and the buying also helps to drive up the price.
You could easily verify if the strategy works by searching ASX.com for 'Announcement of Buy-Back' and check the share price movement in the 6 months following for 20 or so companies.
Considering the current PE is 7.7 assuming static earnings, the ROI on a buy-back is high if you believe true value to be PE 10-12.
Ann: Finbar Announces Activation of On-Market Share Buy-Back, page-5
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Last
83.5¢ |
Change
-0.010(1.18%) |
Mkt cap ! $227.2M | |||
| Open | High | Low | Value | Volume |
| 84.0¢ | 84.5¢ | 82.5¢ | $103.6K | 123.4K |
Buyers (Bids)
| No. | Vol. | Price($) |
|---|---|---|
| 1 | 1204 | 83.0¢ |
Sellers (Offers)
| Price($) | Vol. | No. |
|---|---|---|
| 84.0¢ | 1150 | 1 |
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| Last trade - 15.54pm 19/11/2024 (20 minute delay) ? |
| FRI (ASX) Chart |