A buyback is a financial mechanism in which a company repurchases its own shares from shareholders. This can be done either on the open market or through direct transactions with shareholders, and it involves using corporate funds to purchase stocks that were previously issued by the same company. The purpose of a buyback program may vary, but generally speaking, companies engage in this activity when they believe their shares are undervalued, as a way to return value to shareholders or to increase earnings per share (EPS).