“Since buybacks reduce the number of shares outstanding, they have the effect of boosting stock prices, at least in the short-term. At the same time, buybacks also boost earnings per share even if the underlying business isn’t growing much, if at all, because the same amount of profit gets spread over fewer shares in the hands of investors. In practice, Corporate America has spent billions of dollars on buybacks over the past 10 to 15 years, and not always at the best time, when stock prices are cheap, but instead as steady, recurring way to manufacture earnings per share growth out of thin air. In fact, many S&P 500 companies have taken this practice to excessive levels.”
http://www.moneyandmarkets.com/ado-stock-buybacks-kill-corporate-innovation-profits-74548
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