Impact on EPS
The NCIB will retire up to 3 million shares – roughly 3 % of the current 99.7 million‑share base. By shrinking the denominator in the EPS calculation, the same level of net earnings will be spread over fewer shares, lifting the headline EPS by a comparable amount (≈ 3 %). For a company that is already reporting modest, but positive, earnings, the mechanical boost will be enough to move the “earnings‑per‑share” metric into a slightly higher range, tightening the earnings gap to the “no‑buyback” scenario. In practice, analysts will likely adjust their EPS forecasts upward by a few cents, which can translate into a modest re‑rating of the stock if the market perceives the buyback as a signal of confidence in cash generation.
Effect on valuation multiples
Because the share‑count reduction is small, the price‑to‑earnings (P/E) multiple will not be dramatically reshaped by the buyback alone. If the market price remains static, the higher EPS will compress the P/E (e.g., a 3 % EPS rise cuts a 15× P/E to about 14.5×). However, buybacks are usually priced in by the market: the reduction in float and the perception of a “share‑return” often lead to a modest price premium. In Knight’s case, the limited scale (3 % of float) suggests the price impact will be modest—perhaps a 2‑4 % uplift in the share price over the next few weeks—so the net effect on the P/E will be a combination of a slightly higher price and a slightly higher EPS, leaving the multiple roughly unchanged.
Trading implication
From a trading perspective, the buyback creates a short‑to‑medium‑term catalyst. Expect a modest price‑support level as the market digests the share‑reduction and the implied confidence in cash flow. A breakout above the current resistance (≈ CAD 0.85) could signal the market is pricing in the EPS boost; a failure to hold that level may indicate the buyback is being viewed as a cosmetic move rather than a fundamental upgrade. Positionally, a small‑cap, long‑biased stance with a tight stop just below the recent low (≈ CAD 0.78) would capture the upside while limiting downside if the buyback fails to generate the anticipated earnings uplift.