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Buyback Champs: Maybe Gap’s Not a Has-Been

Jeff Bailey

The Microsoft (MSFT) $40 billion buyback program announced this week sent many of us stock screening junkies looking at who have been the big buyback names in recent years. You can screen for actual buybacks or reduction in shares outstanding, or both, of course.

And if you do so for the S&P 500 you’ll see that there are lots of huge buybacks but fewer companies with dramatic cuts in shares outstanding. Either they’ve been papering the walls of headquarters with employee stock options or using stock for acquisitions.

Here’s a YCharts Stock Screener of average reduction annually in shares outstanding over the past decade. Buyback zealots International Business Machines (IBM) and Directv (DTV), of course, are in the top ranks. But there are some surprises. Gap (GPS), the once-trendy retailer, ranks 8th, having cut its shares out by 48% over the decade.

GPS Shares Outstanding Chart

GPS Shares Outstanding data by YCharts

As one can see, the cash at Gap has gone to buybacks.

GPS Stock Buybacks Chart

GPS Stock Buybacks data by YCharts

So, with flat revenue over the decade (dog stores were closed), net income moved up marginally but EPS, on so many fewer shares, was a rocket.

GPS Revenue TTM Chart

GPS Revenue TTM data by YCharts

Gap stock caught fire a couple of years ago.

GPS Chart

NYSE:GPS data by YCharts

We’re not normally financial engineering fans, preferring to see a growing business, widening margins, new products, all that stuff. But when a company has run out of growth – IBM, perhaps Microsoft, most certainly Gap – cash management becomes crucial to rewarding shareholders. And being able to screen to find these diligent management teams is great.

Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at editor@ycharts.com. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.

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