CA Technologies, a company that trades at less than 8 times forward free cash flow, announced that they bought a cloud computing company for $330 million, or more than 8 times revenue. CA should use all its free cash flow to repurchase stock. CA could increase their EPS at an additional 11% a year by doing so, yet they continue to make dilutive acquisition.Their shareholder base are value investors and this is a slap in the face to them.
Their was a ray of sunshine in the CA press release as they have spent $150 million this quarter on share repurchases, which is a $600 million a year pace. I was hoping for more but it is an improvement over last year's $235 million in share repurchases. CA Inc. shares remain attractive but it is very frustrating to watch management waste money. An activist investor like Carl Icahn could do wonders for CA, by forcing management to return capital to shareholders rather than doing "pie in the sky" acquisitions.