Stock repurchases may be interpreted by investors as a signal that:

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Stock repurchases are often viewed as a signal that the firm's shares are undervalued, and management believes they can generate a better return by buying back shares rather than investing in new projects or paying dividends. By reducing the number of shares outstanding, earnings per share will increase, which may boost the stock price. Therefore, investors may interpret a stock repurchase as a positive signal regarding the company's future performance. However, it does not necessarily imply future repurchases, positive-NPV opportunities, or the replacement of stock dividends.

Stock Repurchases May Be Interpreted by Investors as a Signal