After re-reading my post I worded it badly, my gift is certainly not in my writing skills. Forget P/e's for a second, lets look at raw numbers.
My return on equity (shareholders equity or book value) is of course different than my stock price (in most cases). WHC shareholder equity (which includes intangible assets)and book value are roughly $5.25/share. Trailing 12 months WHC earned $.92. Using those numbers gives you a ROE for WHC of 17.50%($.92/$5.25 after tax) based on it's ASSET value or shareholder equity per share. That means to me, WHC is able to earn 17.50% on it's capital base or net assets, not bad at all.
Now the stock price is $10 which is almost twice the value of it's shareholder equity price. The return on the shareholder's equity price, as I call it, (you and I have to pay a premium to book value or $10) is 9.2% or $.92/$10 (after tax). For every $1 you and I invest in at the market price we are getting 1/2 the earning return as the company is.
When a WHC buys it's own shares back it's getting a considerable less return then applied in it's business based on trailing numbers, as I see it. Of course this is a rear view mirror approach.
The inverse with the P/E you mention is opposite. Invest $1 in a 40 P/e company earns you 1/40 of that dollar yearly or $.04. A company with a 1 P/E earns you $1 and a company with a .50 P/E earns you $1.50 for each dollar invested. The higher the P/E the lower the percent of the dollar you are receiving. Your associcaing p/e's with growth rates I think.
As I have always understood it, if WHC's ROE was LOWER than it's P/E in general then it should buy it's own shares back. But of course ROE is an historical number.
So why do so many companies buy their own shares back? I have no clue financally other then it's easier than creating new business.
Now CPV is a classic case for a share buyback. Book value is 35% ABOVE it share price. It flow of projects nets roughly 3% on a cash basis. It's trailing ROE is 10.8%(based on a $2 FFO, $2/$18.45 BV) and it's return on it stock price is 16.60% (based on $2 FFO, $2/$12) clearly CPV is best to buy it's shares then use capital to do deals. If the past is your guide.
You must also realize that treasury shares REDUCE book value. From an accounting standpoint the shares are redeemed. So share buybacks only use is a slightly accretive boost to earnings.