5 Companies With Stock Buyback Plans That Deliver Great Value

Editors' pick: Originally published Feb. 9.

The two strong pillars of this extended bull market have been share buybacks and dividend hikes. In recent years, firms have shown more interest in these shareholder perks, compared to traditional uses of cash such as M&A, debt reduction of capital spending. Whether that's a good thing is a matter of debate.

What's not up for debate? Steady buyback programs can lead to a profound reduction in the number of shares outstanding. And that can boost earnings per share (EPS) above and beyond a firm's core earnings growth rate.

With that in mind, here are some select stocks that have recently offered new or extended share buyback plans. Each stock will be a growth-and-income winner in 2017.

CorVel (CRVL)

While this firm has been public for 25 years, it's not well-known among most investors. It provides a range of behind-the-scenes healthcare administration services, and only boosts sales and profits at a modest clip each year. But what it does with its profits is crucial. Since fiscal (March) 2008, buybacks have helped to cut the share count from 28 million to a recent 20 million, a nearly 30% reduction. A decade ago, this firm typically earned $0.70 to $0.80 a share. These days, moderately higher profits and the smaller share count push EPS toward the $1.50 mark. And a fresh one million share buyback plan, announced on Feb. 7, should help keep EPS moving higher. 

Comcast Corp (CMCSA)

Even as this cable company has spent heavily to expand into new areas such as content and media, it still throws off so much cash that it can steadily shrink the share count. Thanks to serial buybacks, shares outstanding have fallen every year since 2008, by roughly 20% in that time. And a fresh $12 billion share buyback announced in late January, representing around 7% of the current share count should move the needle further. To be sure, Comcast and its peers are in flux, and before the current phase of industry consolidation has ended, the firm may end up playing a major role in wireless as well. Shares have nearly tripled in the past five years, so the growth-through-acquisition strategy has thus far paid off nicely for investors.

Comcast is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stock here. Want to be alerted before Cramer buys or sells CMCSA? Learn more now.

Lowe's  (LOW)

This do-it-yourself retailer has been a leading player in the share buyback movement. Its share count has fallen by more than 600 million in the past eight years, to around 874 million. Although Lowe's has yet to release fourth-quarter results for the period ended January, it recently said that another $5 billion in fiscal firepower will be unleashed on the share count, putting the figure close to 800 million. And that help partially explains why EPS is expected to at a 15-20% pace in fiscal 2017 and 2018, even as sales grow at a far more modest pace.

Woodward  (WWD)

This maker of industrial components such as valves, actuators, pumps and nozzles has roots going back to 1870. But a recent announcement to buy back $500 million in stock, or more than 10% of shares outstanding is modern. The timing could prove to be quite fortuitous. Woodward is a highly cyclical play, and hasn't seen much sales growth in the past four years. Forecasts of a rebound to 7% sales growth in fiscal 2018 would be the best showing since 2012. That year capped off a five-year stretch of 12% annualized growth. Buying back a lot of shares, before the new industrial cycle starts, makes ample sense.

Ebix (EBIX)

This provider of insurance software has always been a favorite of short sellers. And it has always confounded the shorts with share buybacks, which create enough buying pressure to exact pain on short sellers. Since 2011, Ebix's share count has fallen nearly 20%, to a recent 32.7 million. Considering that this stock still has a short position that equates to 26 days' worth of trading volume, the firm's Feb. 6 announcement of a fresh $350 million buyback, almost 20% of the current share count, is fresh pain for short sellers.


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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.

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