Xero just announced a $1 billion share buyback. Would I buy now?

Detailed summary

Management has made a big statement about the share price, but I'm more interested in what the results reveal about future growth. The post Xero just announced a $1 billion share…

Xero Ltd (ASX: XRO) shares surged 6% to $75.17 on Thursday following the release of the company's half-year results.

And one announcement certainly caught my attention. Management revealed plans to buy back up to A$1 billion worth of shares over the next 12 months.

But is this enough to make me want to buy Xero shares? Let's take a look.

I think the buyback is a big development, especially given the company's recent share price weakness.

Xero's board believes its shares are trading below their long-term value and sees an opportunity to put some of its cash to work.

Buying back shares can benefit remaining shareholders by reducing the number of shares outstanding, potentially increasing their ownership of the business and its future earnings.

Although part of the program will offset employee share-based compensation, I think it's an encouraging sign of management's confidence.

And importantly, Xero believes it can fund the share buyback while continuing to invest in its growth opportunities.

That suggests to me that the company is becoming increasingly comfortable with its financial position.

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