This article was originally published by Seeking Alpha on March 27, 2014
By Sarfaraz A. Khan
By Sarfaraz A. Khan
Summary
- Toyota has announced a $3.5 billion buyback plan.
- The company's ADRs have lagged behind its rivals.
- The company is sitting atop a massive pile of cash which is bigger than Tesla's market cap.
- The company has fallen behind other leading S&P 500 companies in terms of returning cash to shareholders.
- Toyota is eyeing record levels of profits and sales.
After a gap of five
years, the world's leading automaker Toyota Motors (TM), has finally decided
to buy back shares. Following a shareholders' meeting in June, the company will
start purchasing shares worth $3.5 billion over a 10-month period.
So why is Toyota
buying back shares?
Firstly, Toyota's
shares have lagged behind the S&P 500 and some of its rivals. A buyback at
this stage could give a boost to investors' confidence. In the last 12 months,
the S&P 500 has risen by more than 18%, Toyota's biggest rival General
Motors (GM)
has been up 23% while the German automaker Volkswagen (OTCQX:VLKAY), which trades
in the OTC market, has risen by 30%. On the other hand, Toyota's American
depository receipts have been up by just 8.3% in the corresponding period.
Secondly, Toyota has
a lot of cash. Toyota's previous quarterly results revealed that the company's
cash reserves had grown by 24% from the corresponding period last year to an
enormous $34.9 billion. In other words, Toyota had $9.3 billion more cash than Tesla's (TSLA) current market
cap. The auto giant was truly sitting .. read full
article at Seeking
Alpha
