Why companies do it
A share buyback is one way for a company to return surplus cash to shareholders. Because repurchased shares are removed from the count of shares outstanding (either canceled or held as treasury stock), the remaining shares each represent a relatively larger claim on profits and net assets.
What to keep in mind
As the number of shares outstanding falls, EPS and ROE tend to improve, but it's important to note that this does not necessarily mean the company's underlying earning power has improved. It is worth checking the stated rationale (such as a lack of growth investment opportunities or a policy to improve capital efficiency) as well as the size and duration of the buyback program.