Fulgent Genetics stock gains on $250M share buyback program

• Fulgent Genetics (NASDAQ:FLGT) is +4.31% pre-market after announcing a share repurchase program under which it may buyback $250M of its common stock.
• The program will be funded using Fulgent's working capital.
• The genetic testing company had ~30.3M shares of common stock outstanding as of Mar. 07, 2022.

 

Comments

[Andrew Crosby]

I'm so confused by this market though... makes 0 sense... I get the sell-off.... I don't get why profitable growing companies need PE around 15 or lower and stagnant or slow growth or contracting companies earn PEs in the 20s.

[Andrew Crosby]

I'm not a fan of the share buyback plan... I get it, the share price is insanely cheap in pretty much anyway you look at it, but its better spent investing in its own financial well-being and future growth.

[Robert Falcone]

@Andrew Crosby I think some of the theory has to be around persistent inflation. Adding another ~200m of treasuries with a 5-10 year maturity to the balance sheet will obviously lower the value of that cash. They can buy back shares now and if needed list shares in 5-10 years.

[xrayjedi]

@Andrew Crosby and echoing Robert Falcone--the inflation argument was also my concern in another comment-- I'm not sure they could reasonably deploy that cash. Their investments/acquisitions so far have been on the order of $20 million, $50 million. That doesn't mean a much bigger deal isn't in the works, but even at a $100 million dollar yearly pace it would take a decade to spend all that money.

We don't know what price they paid for the shares, but it's probably in the realm of 14-16% of the float if it was close to $50 a share. I get the opposition to smaller buybacks like Amazon just announced-- the less than 1% buyback gets lost in the noise of the split and everything else.

I like to look at it as if it were an S corp or if it regularly divided a fixed set of money among the shares for a dividend. A buyback, particularly of this scale, would have an immediate impact on every partner/dividend recipient. And although we all know FLGT isn't structured that way, the value is still there, for example if they ever did institute a dividend or paid a one time special dividend. So short term investors get a quasi-engineered boost in the stock price, but long term investors can think of themselves akin to partners who have just had their value increased significantly.

[pro8]

@Robert Falcone Buyback makes perfectly good sense or do a dividend but the fact they went with a buy back tells me they want cash to have if they find a hopefully great acq or acqs.

At this point in time it is a very prudent use of cash, to many times companies get cash and waste it on bad acqs or to enrich the mgmt...and buybacks do help the mgmt anyway as most bonuses are based on finances and buybacks enhance those numbers, hopefully that is not happening here to a large extent.

[TinyBirds3333]

Hopefully gets some shorts to cover.

[TMT Investor]

Company will have $40 per share in cash and investments by year-end otherwise, can’t imagine a better use of cash. I’m sure there will be some M&A too, but with valuations reset these guys will not do anything that’s not accretive over the short term.

[xrayjedi]

@TMT Investor Not to mention if you hold cash too long it's practically burning a hole in your pocket with inflation.

[Einsteinpfleet]

Smart move by smart management

[Robert Falcone]

Would be great if this pops on a muted trading day.

[AI STONKS]

@Robert Falcone maybe a buy signal? This has been crushed along with everything else…

[xrayjedi]

@SrupB not every day that a company buys back close to 1/6 of the float and only spends 25% of cash on hand to do it.

I like it not only in principle but as an attempted shakeup to the general trend.

[AI STONKS]

@xrayjedi great points, looks wise to maybe look at starting a position.