Look for Companies Buying Their Own Stock in the Open Market

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One fairly positive sign, particularly in small- to medium-sized companies, is for the concern to be acquiring its own stock in the open marketplace over a consistent period of time. This reduces the number of shares of common stock in the capital structure and implies the corporation expects improved sales and earnings in the future.

Total company earnings will, as a result, usually be divided among a smaller number of shares, which will automatically increase the earnings per share. And as we've discussed, the percentage increase in earnings per share is one of the principal driving forces behind outstanding stocks.

Tandy Corp., Teledyne, and Metromedia are three organizations that successfully repurchased their own stock during the era from the mid- 1970s to the early 1980s. All three companies produced notable results in their earnings-per-share growth and in the price advance of their stock.

Tandy (split-adjusted) stock increased from $234 to $60 between 1973 and 1983. Teledyne stock zoomed from $8 to $190 in the thirteen years prior to June 1984, and Metromedia's stock price soared to $560 from $30 in the six years beginning in 1977. Teledyne shrunk its capitalization from 88 million shares in 1971 to 15 million shares and increased
its earnings from $0.61 a share to nearly $20 per share with eight different huvbacks.