The A2 Milk Co Ltd (ASX: A2M) share price edged higher today despite the broader market falling wayside.
During the day, shares in the infant formula rose as high as $5.37 but whittled away as the day went on.
However, a strong last-minute finish saw A2 Milk shares close at $5.40, up 0.94%.
For context, the All Ordinaries Index (ASX: XAO) ended 0.55% lower to 6,659.8 points.
A2 Milk commences share buyback
Late last month, the company advised it was conducting a NZ$150 million (A$131 million) share buyback to increase shareholder value.
It was considered to be the most appropriate form of capital management amid COVID-19 related disruption and market headwinds.
The buyback programme is expected to commence towards the end of September 2022 and may run for up to 12 months.
A2 Milk noted that it may acquire shares through the NZX and ASX at the market price within the above period.
A maximum of around 37.18 million A2 Milk shares can be bought which represents no more than 5% of the company’s existing shares.
Traditionally, when a company looks to purchase its own stock, this pumps up the earnings per share (EPS) metric.
It also allows the company to take advantage of the share price weakness when it doesn’t reflect the underlying value of the business.
Furthermore, the value of each individual share also increases as there are fewer shares on the company’s registry.
The on-market buyback program does not require shareholder approval and will be executed at the company’s discretion.
A2 Milk share price snapshot
Despite the buyback announcement, it’s been a disappointing 12 months for the A2 Milk share price which has fallen 11%.
Year-to-date, its shares are down by 1%.
A2 Milk commands a market capitalisation of roughly $4.02 billion and has approximately 743.66 million shares outstanding.
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Motley Fool contributor Aaron Teboneras has positions in A2 Milk. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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