Dilutive buyback
Definition · Level 10 · Valuation
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A share repurchase that lowers earnings per share, because the earnings yield of the shares bought is below the after-tax cost of the cash used. It happens when the P/E is high.
Example
At $56 a share (40x earnings) the same $140M buyback cuts Brewline’s EPS to $1.36.
Where Tradecraft teaches it
Level 10 · Valuation, in the lesson “Buybacks: when do they lift EPS?”: A buyback shrinks the share count but costs cash: compare the earnings yield with the after-tax cost of that cash.
Related terms
- Accretive buybackA share repurchase that raises earnings per share: the earnings yield of the shares bought (EPS ÷ price) beats the after-tax cost of the cash used.
- 10-K / 10-Q / 8-KFilings with the US Securities and Exchange Commission: the audited annual report, the unaudited quarterly report, and the current report for…
- Accrual accountingRecording revenue when earned and costs when incurred, whatever the date cash changes hands.
- Adjusted EBITDAEBITDA after the company adds back costs it calls one-off, such as restructuring.
- AssetsResources a company owns or controls that should bring future benefit: cash, receivables, inventory, equipment, intangibles.
- Balance sheetA snapshot on one date of what a company owns, what it owes and the owners’ remaining claim, always satisfying assets = liabilities + equity.