NN, Inc. (NDAQ: NNBR) shares surged higher after the company announced a new $20 million share buyback program. The program would result in a little less than a 10% reduction in the number of shares on the open market. Investors are hoping that this reduction will help boost the company's earnings per share number as less shares outstanding increases the equation. This should then encourage investors to revalue the stock at a higher multiple.
Buying back stock is good for several reasons. First, it uses up excess cash on the balance sheet and provides a better return than the money market. Secondly, buying back stock can increase the company's return on equity along with other financial ratios as less shares outstanding increases the fraction in many cases. And finally, buying back stock has a psychological effect on the market in that it signals that the firm itself believes that its shares are undervalued.
NN, Inc. operates in three segments: the metal bearing components segment, the plastic and rubber components segment, and the precision metal components segment. Within the metal bearing components segment, the Company manufactures and supplies high-precision bearing components, consisting of balls, cylindrical rollers, tapered rollers and metal retainers, for bearing manufacturers on a global basis.
Related CompaniesThe Timken Company (TKR)RBC Bearings Incorporated (ROLL)Kaydon Corporation (KDN)