Asia Buyback Forecasting | Which Companies Are Likely to Raise/Cut Buybacks?

What's Original?

• We have two separate models, one for forecasting Buyback Raise and the other for Buyback Cut.
• Our back test results are very encouraging with >85% hit rate for our Buyback Raise model and >94% hit rate for our Buyback Cut model.
• For our Buyback Raise model, we differentiate from other quantitative buyback models by incorporating competing uses of cash like inorganic acquisitions through “Goodwill as % of Total Assets” parameter. Based on our analysis, we have also determined that, contrary to usual perception, any dividend payout is not a competing use of cash vs buyback but a healthy sign of capital return discipline and have incorporated it accordingly in our model. We also use long-term ROE vs growth trends to filter companies where the cash levels maybe low but the capability to do buyback with time can grow significantly. At the same time, we ensure to weed off very high growth companies that may have high re-investment needs through our carefully selected threshold for the "Long-term Revenue CAGR" parameter.