Share Buy Back means the company is purchasing its own stock thus reducing the number of outstanding shares in the market. Reducing the outstanding shares results to higher earnings per share because earnings per share is computed by dividing net income over the number of shares outstanding.
What does this mean for the investors? Share buy back is a signaling technique by companies. This sends a message "our shares are worth more than the market values it". Why? Because, if you take a look at it, the company is spending investor's money to purchase shares in the market. And before the company can do this, this has to be approved by the board of directors. Just to make it short, share buy back are authorized by current investors because they believe that the company is worth more than what the stocks are currently selling thus they are willing to buy it now while it is cheaper.
This has the same impact when CEO/CFO or any other top executive deals with the company stocks. If the CEO pitches to the investors how good the company is then you'll see in the SEC report that the CEO is dumping stocks then you'll have a second thought. The CEO must know something that's why he's unloading himself of the stocks. Because if not, why will he unload himself of the stocks if he knew the company will perform.
On the other hand, if CEO buys stocks in the market, this sends a signal to the public how confident the CEO is about the future performance of the company.
