Question

think about companies that have high valuation multiples (for example, high Price:Earnings or high Price:EBITDA) versus those with low multiples. Which group would you expect to undertake more share repurchases? Please give at least two reasons to support your answer.

Answer 1

Companies with low valuation multiples are likely to do share repurchase. Two reasons are as follows:

1. Since company share price is undervalued so it is good for company to buy at discount because it can give more return in future. It can provides greater share holders return.  

2. There is higher probablity of growth with low valuation multiples companies in longer run and it will provide handsome return in forseen future but with high valuation stock there might be chance of negative return since these stocks are already overvalued.