Share repurchases signal both that company leadership may believe their company’s shares are undervalued, and that the diminished amount of outstanding shares will raise the company’s earnings per share and thus likely the price of the stock.
Buybacks are also increasing. In the U.S. in 2013, they were up by 19.2% compared to 2012, to $475.6 billion, according to Standard & Poor’s. The highest point was $589.1 billion reached in 2007, and during the recession in 2009 companies spent $137.6 billion. In the first quarter of 2014, U.S. companies spent 59% more on repurchases than in the same period a year ago.
In Europe, the first buyback ETF, Solactive European Buyback Index, posted an average annual return of 23.17% from November 2008 to March 2014. The index includes companies from 16 western European countries that have a minimum market capitalization of 500 million and an average trading value of 2 million over the last three months.
The GuruFocus All-in-One Screener filters for attractive stocks with strong buyback records in Europe. Setting the screener to search companies with financial strength of at least 7, predictability of 5 stars and with at least a 10% buyback rate, the screener shows the best matching companies are: Boiron (FRA:BON, Financial), Baron de Ley SA (LTS:0DPW, Financial), Swedish Match AB (OSTO:SWMA, Financial) and Next PLC (FRA:NXG, Financial).
Boiron is a France-based homeopathic medicine developer with a €1.22 billion market cap.
In the past three years, the company reduced its share count at an annual rate of 3.3%.
Boiron’s share repurchase history:
Boiron in April announced it would propose a repurchase authorization of 10% of its capital at a maximum price of €80 euros or a total of €155.5 million, expiring in 18 months.
The company reports annual per-share growth rates in the past five years of 6.4% for revenue, 12.9% for EBITDA, 46.6% for free cahs flow and 7.5% for book value growth. It ended the first quarter of 2014 with €183.3 million in cash on its balance sheet, versus €159.8 million at year-end.
Boiron also has a financial strength rating of 6 and business predictability rating of 5-star.
Baron de Ley SA (LTS:0DPW, Financial)
Baron de Ley is a wine company with a market cap of €341.1 million.
The company has a three-year share buyback rate of 3.7%.
Baron de Ley’s shares outstanding history:
Baron de Ley ended the first quarter with €15.5 million in cash on its balance sheet, versus €5.8 million at year-end.
The company has five year per-share growth rates of 3.8% for revenue, 8.3% for EBITDA, 6.7% for free cash flow and 8.2% for book value.
Swedish Match AB (OSTO:SWMA, Financial)
Swedish Match is a producer of smoke-free tobacco, cigars and tobacco with a €47.04 billion market cap.
The company has a three-year share buyback rate of 4.1%.
Swedish Match’s share repurchase history:
In the first quarter, Swedish Match bought back 0.3 million of its share for 68 MSEK at an average price of 205.34 SEK, connected to its share authorization approved in 2013. Since the program started, the company has repurchased its shares at an average price of SEK106.37.
Swedish Match has cash totaling SEK3.6 billion at the end of the quarter, compared to SEK3.16 billion at year-end.
Five-year growth rates are 1.9% for revenue, 7% for EBITDA and 3.9% for free cash flow.
Next is a UK-based clothing, footwear and home products retailer with a €13 billion market cap.
The company repurchased shares the fasted of all companies screened: a three-year rate of 5.7%.
Next’s shares outstanding history:
In March, Next announced it would repurchase shares with a price limit of 62.45 pounds per share. Because the price never fell to that point, the company is instead returning surplus capital to shareholders in the form of a special dividend of 50 pence per share to be paid Aug. 1. It also decided to raise its buy back price limit to 64 pounds per share.
Next has five-year growth rates of 8.9% for revenue, 13.3% for EBITDA, 17.1% for free cash flow and 25.5% for book value.
The company is also ranked a 9 for financial strength and five-star for predictability.
For more stocks matching the criteria set in this article, use the All-in-One screener here.
