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Online Investors’ Ten Most Common Questions

If a company is buying its stock back, does that mean the stock is cheap?

Some investors think it’s the ultimate “buy” recommendation when a company says it’s planning to buy back its own stock. Stocks often rise after a company tells Wall Street it’s launching a stock-buyback program.

But investors should be skeptical of buybacks. For one thing, just because a company says it will buy back stock doesn’t mean it will. Academic studies show about a third of companies that say they will buy back stock never do.

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