Exactly. When your company buys shares back (or issue a dividend) you're basically telling shareholders "We have all this cash but we have no idea what to do with it that will provide a return greater than our Hurdle Rate, so we're just going to give it back to you." It doesn't exactly inspire confidence to me as an investor that the company is creative and forward-looking, but apparently most investors love this signal.
Isn't a company supposed to make a profit though? At some point aren't a lot of companies pretty much at their functional maximum? Investing in 'growth' isn't always practical. Example: All-Clad makes great cookware, but they last a long time and the number of people who need new pans are finite -- why should they invest more money into the company when they are operating optimallly?
ryandrake|2 years ago
Eisenstein|2 years ago