How Share Repurchases Boost Earnings Without Improving Returns

How Share Repurchases Boost Earnings Without Improving Returns by Obi Ezekoye, Tim Koller, and Ankit Mittal – McKinsey & Co

Some actions that boost earnings per share don’t create value for shareholders. Share repurchases are generally a wash.

Of all the measures of a company’s performance, its earnings per share (EPS) may be the most visible. It’s quite literally the “bottom line” on a company’s income statement. It’s the number that business journalists focus on more often than any other, and it’s usually the first or second item in any company press release about quarterly or annual performance. It’s also often a key factor in executive compensation.

But for all the attention EPS receives, it is highly overrated as a...