Stock buybacks, or share repurchases, occur when a company buys back its shares from the market. This strategy offers several benefits to shareholders:

Increased Earnings Per Share (EPS): By reducing the number of outstanding shares, buybacks boost EPS, making the company appear more profitable on a per-share basis.

Higher Share Prices: Reduced supply of shares often increases demand, driving up the stock price and benefiting existing shareholders.

Tax Efficiency: Unlike dividends, which are taxed as income, buybacks can offer capital gains tax benefits if shareholders sell appreciated shares later.

Signals Confidence: A buyback indicates that the company believes its stock is undervalued, boosting investor confidence.

Flexible Capital Allocation: Companies can return excess cash to shareholders without committing to recurring dividend payments.

Improved Return on Equity (ROE): With fewer shares outstanding, ROE improves, making the company more attractive to investors.

Prevents Dilution: Buybacks offset dilution from employee stock options, protecting shareholder value.

While buybacks can be beneficial, they must be executed prudently—excessive repurchases using debt or at inflated prices may harm long-term growth. Overall, when done right, buybacks enhance shareholder value.