What is the typical effect of a share buyback on a company's stock price?

A share buyback typically results in an increase in a company's stock price due to several interconnected factors. When a company repurchases its own shares, it reduces the overall supply of shares available in the market. This reduction in supply can create upward pressure on the stock price, particularly if demand remains constant or increases.

Moreover, share buybacks are often viewed positively by investors as a signal of management's confidence in the company's future prospects or as a strategy to enhance shareholder value. Investors may interpret a buyback as an indication that the company's stock is undervalued, prompting increased demand and potentially driving the price higher.

Additionally, by decreasing the number of shares outstanding, buybacks can improve key financial metrics such as earnings per share (EPS), further encouraging investor interest and potentially resulting in a higher stock price.

Overall, the typical effect of a share buyback is to bolster the stock price, reflecting the perception of increased valuation and financial health of the company.