Home Depot Bought $7 Billion of Its Stock; Should Investors Follow?
After suspending share repurchases at the pandemic's onset, Home Depot (NYSE: HD) has brought them back recently. In the first two quarters of fiscal 2021, Home Depot spent $6.9 billion on share buybacks.
Importantly, when a company buys its stock, it reduces the number of shares outstanding. The effect that ends up having is profits are split among fewer shares. In other words, each share gets a larger portion. At a market capitalization of $342 billion as of this writing, a $6.9 billion share purchase has a relatively minor impact. Indeed, weighted average shares outstanding decreased by 0.8% from the same six-month period last year.
Still, if Home Depot is spending this much money on buying its stock, does that mean investors should follow and do the same? Let's take a closer look at the company's long-term prospects and determine if that's a good idea.
Source Fool.com
