Autozone, Inc. (AZO), Macy’s, Inc. (M), Bed Bath & Beyond Inc. (BBBY): 3 Retailers Buying Back Their Own Shares

The extent of excellent capital allocation doesn’t seem to be priced into the stock, however. The company trades at 12 times forward earnings estimates and roughly 20 times annual free cash flow. Organic growth from rising consumer spending and an improving housing market only stand to lever the company to the upside, especially as it retires shares as part of its freshly announced $2.5 billion program.

Why retail cannibals rock

Agency problems are the biggest issues with minor equity positions. Management often has incentives that run counter to shareholder interests. A new acquisition, growing store counts, or a combination of the two leads to a larger enterprise, which in turn is often used to justify a bigger salary.

Managers who are not afraid to pass up on growth opportunities to repurchase shares are managers worth running the companies in your portfolio. These three companies have a history of being excellent capital allocators for their shareholders, and shareholders have come to expect nothing less.

The article 3 Retailers Buying Back their Own Shares originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.