tw telecom Finds Something to Do With All That Free Cash Flow

November 21st, 2011 by · 1 Comment

tw telecom says its Board of Directors has authorized an expansion of its share buyback, and not a token one either. The plan allows for up to $300M over the next few years, which at current prices would be 12% of their current float. The plan extends its $100M buyback plan, under which it spent $50M in each of the last two years.

Despite those buybacks, the company is still sitting on $470M in cash and equivalents, the enviable result of steady and strong free cash flows. They have eschewed M&A even while much of the rest of the industry has been consolidating, and instead have poured more money back into the business. They have been adding 500 buildings per quarter to their network for a year now, a number that will be hard to boost too much higher - though it would be nice to see that effort bring their overall growth rate into the double digits soon.

There are other places the company could invest that cash though without resorting to M&A of course.  They could open new markets in the northeast for instance, or take a more aggressive tack on the wholesale side of things.  But of course they can still do any of those things, a stock buyback is an optional use of cash.

While they've bought back $100M worth of stock in the past two years, the stock price remains where it has been for years:  the high teens with an occasional burst above $20.  Since they believe the company is undervalued and on the right path, they are therefore sticking to their guns.

 

Categories: Financials · Metro fiber

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