The biggest issue that American Greetings was dealing with was the overall deterioration in the greeting card business. Industry experts had decided that their market had contracted by 9% since 2005, and that the movement would most likely remain the same. The Mintel industry analyst firm had a best-case situation of a 4% decrease over the next four years, and a worst-case situation of 16%. The decline in sales were moist likely due to the surge in alternate methods of social expression. There was a technological change in the overall greeting cards market to the easier way of sending greeting, the e-cards. When faced with conditions of low equity approximations, American Greeting’s management team normally chose to buyback; and given the circumstances, they were thinking about a $75 million repurchase program. They placed themselves as a frontrunner in social expression products and services through a numerous amount of new business facets such as: electronically selling greetings, owning several dissimilar brands apart from American Greetings, and certifying current characters they possessed the rights to. …show more content…
AG’s international social expression products net sales improved by 31%, greeting cards improved by 9%, and gift wrapping improved by 7%. Apart from minor advances in income, their weighted average cost of capital has been maintained the in past 3 years. I think that American Greetings would benefit from the repurchase of shares. The share price is at a 5 year low in January 2012 at $12.51 a share. Income growth is at a five year high of 7% expected and 5.3% actual. The operating margins were also at an all-time high for the company at 9%. With this information I think this would be a good investment for the company. Repurchasing shares when share price is underestimated benefits the long-term