NEW YORK (TheStreet) -- From Apple  (AAPL - Get Report) to Monsanto  (MON) , share buybacks are an increasingly popular way for companies to boost earnings per share. But there are some cases where the strategy may have gone too far.

Take AutoZone (AZO) , the well-known auto parts retailer with some 5,000 locations in the U.S., Mexico and Brazil.

From the beginning of 1998 to the end of 2014, AutoZone reduced its share count from 160 million to 30 million. That sharply boosted earnings per share -- and has given investors a nice payback. A $1,000 investment in AutoZone in 1998 was worth nearly $22,000 at the end of 2014. 

The problem is that companies can't rely solely on stock buybacks to boost earnings. And they can't do buybacks forever. 

AutoZone's "earnings have been driven by share repurchase," says Ali Faghri, analyst at Sterne Agee. "And I think the key is that that share repurchase isn't going to be there to the same degree that it's been in the past."

AutoZone management, however, gives no indication it plans to stop buybacks anytime soon.

"We continue to view our share repurchase program as an attractive capital deployment strategy," said CFO Bill Giles during the company's most recent earnings call on Dec. 9.

A call to AutoZone spokesman Ray Pohlman wasn't returned.

AutoZone isn't alone either. Share buybacks by S&P 500 (SPY - Get Report) companies totaled more than $567 billion in the 12 months ended Sept. 31, 2014,  a 27% increase over the prior 12-month period, according to FactSet.

And there are plenty of signs the trend will continue. Witness the pressure Carl Icahn has put on Apple for even more buybacks than the $56 billion it spent in 2014.

Still, AutoZone's buyback-fueled growth could create problems.

Sterne Agee's analyst Faghri says the company pays for the buybacks by borrowing. That includes financing the company gets from its vendors, the auto supply manufacturers.

However, Faghri sees danger signs. He says the company's accounts payable-to-inventory ratio topped out at an industry high 115% and can't go higher. He also notes that the ratio fell slightly to 114% in the latest quarter, a sign that the company can't push terms out any further.

In essence, "their vendors finance all of their inventory," Faghri says.

And if AutoZone increases its debt levels, it could trigger covenants on outstanding bonds, requiring it to pay back that debt earlier.

Finally, Faghri believes AutoZone will need to increase spending in order to compete in what the auto repair industry calls the "do-it-for-me" business.

That's because it gets 80% of its revenue by selling parts to do-it-yourself mechanics. However, being a do-it-yourself mechanic is increasingly difficult since vehicles are getting too complex, Faghri says. He doesn't believe AutoZone management has come to terms yet with the need to increase its spending to address this industry shift.

Read more: More Activists Are Fine With Management; They Just Want the Cash

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