RYANAIR says it bought back seven million shares yesterday — bucking the global sell-off that sent the Stoxx Europe 600 Index to its steepest drop since May 2010.
Ryanair said it bought the shares for €3.07 apiece, or €21.5 million in total. The stock closed 0.1% higher following the purchase and was one of only 18 to show a gain on the 600-member index.
Investors may also have bought stock after the company fell for eight straight sessions to close at a 14-month low on August 3, triggering purchases based on technical measures.
"Management obviously believe the shares are undervalued and it expresses confidence in earnings estimates," Goodbody Stockbrokers analyst Eamonn Hughes said.
"It may also strengthen the technical position of the stock if the market comes round to thinking that the company is there to purchase shares."
Ryanair has permission from shareholders to repurchase as much as 5% of its stock, with yesterday’s buyback equal to only 0.5%, Hughes said in a note, adding that the move "kind of comes out of left field" after the carrier had focused on returning cash to investors via a special dividend.
The buyback was immaterial for Ryanair’s balance sheet, which will be close to being un-geared at the year end, with a €3.8 billion "cash pile," the Dublin- based analyst said.
Ryanair has fallen 19% this year, valuing the company at €4.53bn. Ireland’s 51-member ISEQ Index has declined 13% over the same period.
The stock’s traded volume surged yesterday after its Relative Strength Index — a measure derived by averaging out daily gains and losses over 14 trading days — dipped to 30, a reading that indicates a security may rebound.
Ryanair had also dipped below its lower Bollinger band, a indicator of probable support and resistance levels for a stock’s price based on 20 days of data.
When a price touches one band it usually moves toward the other, also indicating a rise.
Ryanair posted net income of €139.3m for the three months ended June 30, little changed from €138.5m a year earlier, it said on July 25.