Modeling Question - Stock split or buyback
If a company does a stock split or buyback, how do you model it? For the next quarter, do you assume the total effect of the split / buyback... Or do you take the effect at the end of the year?
Not really sure what you're asking but will give it a shot. For a buyback just link in the number of shares being bought back to the share count you are using to hit EPS. Make sure that you flow the buyback through your cash flow as well and dynamic with all statements. To model out how much the co is buying back is for you to decide.
Nothing fundamentally changes when you do a stock split i.e. same revs, cogs, sg&a and net income. The only thing changing is the number of shares outstanding. EPS is going to change based on the multiple of the stock split but it is all based off of same net income ...only shares are changing. So pretty much you really shouldn't be stressing on how to model it. If you're showing stock charts/prices just make sure they're all standardized but bloomberg and capiq do that automatically I believe.
OK thanks. I guess what I'm trying to say is, if the company announces a stock split but doesn't say exactly when the split will happen, how do you model out the effect over the next few quarters? If you assume the split takes place in the next quarter, but the company does not perform the split in the next quarter, then your EPS numbers are off and consensus is skewed etc, and it makes you look like you don't know what you are doing. Is there a standard way of addressing this, maybe a convention that analysts follow to smooth out the effect of not knowing when an announced stock split or buyback will actually take place? Thanks again.
I don't have a serious answer or anything, but since when did matching consensus mean you look like you know what you're doing? Have you called the company and asked them for the timing?
stock splits are always announced for a public company.
If you have your model broken up in quarters, then address in the next quarter.
If its a yearly model - address it at the end of the year and add a comment to note this.
what about a buyback? If it has been announced, but you are not sure when the purchase will actually be made or how long it will take?
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