Shares of multi-national share registry services business, Computershare Limited (ASX: CPU), today jumped 2.3% higher, bucking off the slight sell down of the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
Following a one-day fall in share price of almost 13% earlier this month, Computershare today announced to the market that it will undertake a share buyback worth as much as $140 million, starting no earlier than September.
Based on yesterday's closing price of $9.69 per share, as much as 14.4 million shares could be bought back by the company. With roughly 556 million shares on issue, that's equivalent to 2.6% of all shares.
Is this good news for shareholders?
Although the company didn't provide much colour on the buyback, the basic principle behind them is that companies should undertake them when it is cheap to do so, relative to the funding used pay to for the shares.
Some company managers will also do it to protect their company against takeovers or simply because they've run out of viable growth ideas.
Remember, buying back your own company's shares can boost profitability metrics like return on equity (ROE) and earnings per share (EPS).
If Computershare's management does, in fact, believe its shares are cheap, it may be welcomed by some analysts. Indeed, although a swarm of analysts recently moved to downgrade the stock following its disappointing results, based on eight analysts' price targets I've seen, Computershare's consensus value is currently $11.48, well above today's market price.
Is Computershare a buy?
At today's prices, Computershare looks to be a worthwhile investment for those focused on the medium to long term, with plenty of macroeconomic tailwinds at its back. It is also a reputable — and globally diversified — business that offers a stable dividend yield.
