Q: Just reading about this company and they are buying back 2.3 million shares for the purpose of “cancellation”Could you explain to me what this means other than the obvious of helping their EPS and not having to pay those dividends,am I missing anything here I e just never heard that term before.Also what would be a good entry point for this stock for a 1-3 year hold. Thanks
5i Research Answer:
When companies buy back their own shares, the company can either cancel them or hold them as treasury shares. It is mostly just accounting terms, the primary purpose of the share buybacks are still the same - it is intended to reduce the total share outstanding and boost EPS in the near term.
A share buyback is a more tax-efficient alternative method to return capital to shareholders compared to raising dividends, potentially creating a compounder over time. Despite strong performance recently, EQB is trading at only 8.8x Forward P/E; we think EQB’s valuation is quite attractive as of today.