Why The Stock Buyback Craze Will Continue—Look At Trex’s Example

Buybacks have been all the rage in recent years, as companies support their stock prices by scarfing up shares. This has the effect of bolstering earnings per share because there are fewer shares to divide into the earnings. Will the repurchasing party keep rolling? Odds are it will, although uncertainty about the economy and the market could temper the pace a little, for a while.

The continuing longevity of buybacks is assured because, for many companies, buybacks are an ongoing strategy—they are very effective at elevating share prices. Take Trex, which makes composite decking. It bought 6.5 million of its common shares last year, for $395 million, and in May launched a new program to repurchase up to 10.8 million shares, constituting one-tenth of its shares outstanding. In this year’s second quarter, the company laid out $16 million for buybacks.