Quad/Graphics Shares Surged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Fresh off its appearance on the NYSE's list of worst-performing stocks yesterday, shares of Quad/Graphics (NYS: QUAD) are hopping today -- up as much 13%!

So what: Taking advantage (?) of a depressed stock price, Quad's management announced a share buyback program late last month. If all goes according to plan, the company could repurchase as much as $100 million worth of stock. Seeing this vote of confidence from management, investors are rushing to scoop up shares of this now supposedly cheap stock.

Now what: Standard disclaimers apply. Specifically: "The timing, manner, price and amount of any repurchase will be determined by the Company at its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The program may be suspended or discontinued at any time." (Translation: "We may not buy back anything at all.")

There's also the tiny problem that Quad/Graphics doesn't actually have $100 million to spend just now. In fact, it's got less than $17 million in the bank at last report -- against $1.6 billion in debt. It's also generating free cash at a rate of less than $27 million per year. Management has written to inform me that it's laser-focused on paying down debt right now. I'm not so sure, though, that Quad will be able to both walk and chew gum at the same time -- to pay down debt and buy back shares with the limited cash at its disposal.

Disagree? Think Quad will come up with the cash, and make this buyback a reality?Add it to your watchlistand find out.

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