Alithya's Aggressive Share Buybacks: A Strategic Move to Unlock Shareholder Value?

Alithya Group Inc. (TSX: ALYA) has recently unveiled an aggressive share buyback program, authorizing the repurchase of up to 10% of its public float—approximately 5,939,183 Class A subordinate voting shares—under a normal course issuer bid (NCIB) Alithya announces normal course issuer bid, [https://www.prnewswire.com/news-releases/alithya-announces-normal-course-issuer-bid-302551793.html]^[1]. This move, announced on September 10, 2025, underscores the company's commitment to enhancing shareholder value while signaling confidence in its intrinsic worth and long-term growth trajectory. But does this strategy align with sustainable capital allocation, and can it meaningfully boost long-term returns for investors?

Strategic Rationale: Capital Allocation and Value Creation

Alithya's buyback program is framed as part of a broader capital allocation strategy aimed at optimizing its balance sheet, reducing debt, and deploying capital into growth initiatives Alithya announces normal course issuer bid, [https://www.prnewswire.com/news-releases/alithya-announces-normal-course-issuer-bid-302551793.html]^[1]. Management emphasized that the repurchases will be executed at management's discretion, contingent on market conditions, and reflect the belief that shares are undervalued Alithya announces normal course issuer bid, [https://www.prnewswire.com/news-releases/alithya-announces-normal-course-issuer-bid-302551793.html]^[1]. This aligns with conventional wisdom in corporate finance: share buybacks can enhance shareholder value by reducing the number of shares outstanding, potentially increasing earnings per share (EPS) and signaling management's conviction in the company's prospects.

The timing of the program is noteworthy. Alithya reported a 11.1% year-over-year increase in adjusted EBITDA to $10.1 million in Q1 FY2025, despite an 8.1% decline in revenue to $120.9 million, driven by a 300 basis point expansion in gross margin to 31.9% and a 120% surge in operating cash flow to $16.7 million Alithya Group Inc. (ALYAF) Q1 FY2025 earnings call transcript, [https://finance.yahoo.com/quote/ALYAF/earnings/ALYAF-Q1-2025-earnings_call-202144.html/]^[3]. These metrics highlight the company's ability to generate robust cash flow despite revenue headwinds, providing a financial foundation for shareholder returns.

Financial Health: Capacity and Constraints

Alithya's capacity to fund the buyback hinges on its liquidity and debt profile. As of 2025, the company's enterprise value stands at CAD 288.89 million, with a net cash position of -$125.92 million, indicating significant debt relative to cash reserves Alithya Group (TSX:ALYA) Statistics & Valuation Metrics, [https://stockanalysis.com/quote/tsx/ALYA/statistics/]^[2]. While this raises questions about leverage, the Q1 FY2025 results demonstrate strong operational efficiency, with operating cash flow more than doubling year-over-year. This suggests that the company could sustain the buyback without compromising growth investments or debt servicing.

However, the stock's 52-week decline of 11.79% Alithya Group (TSX:ALYA) Statistics & Valuation Metrics, [https://stockanalysis.com/quote/tsx/ALYA/statistics/]^[2] implies that the market may not currently reflect the company's intrinsic value—a gap the buyback aims to address. By repurchasing undervalued shares, Alithya could theoretically boost EPS and unlock value for shareholders. Analysts in related sectors note that such buybacks are most effective when executed at a discount to intrinsic value, a condition that appears to apply here Tuesday's analyst upgrades and downgrades, [https://www.theglobeandmail.com/investing/markets/inside-the-market/article-tuesdays-analyst-upgrades-and-downgrades-for-jan-30/]^[4].

Risks and Considerations

Critics may question whether the buyback diverts capital from higher-return growth opportunities. Alithya's focus on “smartshoring” expansion and long-term contract wins Alithya Group Inc. (ALYAF) Q1 FY2025 earnings call transcript, [https://finance.yahoo.com/quote/ALYAF/earnings/ALYAF-Q1-2025-earnings_call-202144.html/]^[3] suggests a dual strategy of organic growth and shareholder returns. However, the net cash outflow and elevated debt levels necessitate careful monitoring to ensure the buyback does not strain financial flexibility.

Additionally, the absence of direct analyst evaluations on the 2025 program's effectiveness means investors must infer its potential impact from broader trends. For instance, the company's buyback yield of -1.35% Alithya Group (TSX:ALYA) Statistics & Valuation Metrics, [https://stockanalysis.com/quote/tsx/ALYA/statistics/]^[2] indicates ongoing repurchases, but the scale remains modest relative to its market cap of CAD 117.82 million Alithya Group Inc. (ALYAF) Q1 FY2025 earnings call transcript, [https://finance.yahoo.com/quote/ALYAF/earnings/ALYAF-Q1-2025-earnings_call-202144.html/]^[3]. To meaningfully alter EPS, the program would need to be sustained over multiple years or paired with further share price declines.

Conclusion: A Calculated Bet on Value

Alithya's share buyback program represents a calculated effort to align capital allocation with shareholder interests. The company's strong cash flow generation and margin expansion provide a credible foundation for the initiative, while its strategic emphasis on debt reduction and growth investments mitigates short-term risks. However, the program's long-term success will depend on execution discipline, market conditions, and the company's ability to maintain operational momentum. For investors, the buyback signals management's confidence—a vote of confidence that, if paired with continued financial discipline, could translate into tangible value creation.