Could CSL’s buyback continue?

Blood plasma and vaccine manufacturer CSL (ASX: CSL) is tipped to carry out a new $900 million share buy-back after its current buy-back concludes, according to a report by the Australian Financial Review.

Analyst Matthew Prior from Bank of America Merrill Lynch has suggested management at CSL will be looking to capital management initiatives given the company’s high cash generation. These initiatives could include acquisitions to expand its presence in China and a renewed buy-back. Given the rosy outlook for growth and cash flow, Prior has upgraded his price target for CSL to $71.25 which compares with a current trading price of $66.40.

Share buy-backs, when conducted at a reasonable price, can be a great way to improve shareholder value. However share buy-backs conducted on overpriced shares can be value-destroying to shareholders, so they are not without risk. Other firms currently conducting buy-backs include media and entertainment company Twenty-First Century Fox (ASX: FOX), pharmacy wholesaler Sigma Pharmaceuticals (ASX: SIP) and engineering contractor Clough (ASX: CLO).

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Motley Fool contributor Tim McArthur owns shares in Twenty-First Century Fox.

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