EC, Ecopetrol S.A.

Will it survive?

• Can it pay its interest? 3.7×
  Adequate
  Operating income COP 38.46T ÷ interest expense COP 10.32T
  What this means

  Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.

• How heavy is the debt, net of cash? COP 104.77T · 2.7× operating profit
  Meaningful net debt
  Cash COP 14.05T + ST investments COP 1.14T − debt COP 119.97T
  What this means

  Netting COP 15.20T of cash and short-term investments against COP 119.97T of debt leaves COP 104.77T owed, about 2.7× a year's operating profit (3.1× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? 17d
  Tight
  DSO 56 + DIO 42 − DPO 81 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

• Return on invested capital 13%
  Solid through the cycle
  9-yr median, range 4%–20%; 11% latest = NOPAT COP 20.44T ÷ invested capital COP 185.77T
  Industry peers: median 7%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 9 years (it ran 11% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin 18%
  High through the cycle
  10-yr median margin, range 7%–33%; latest COP 35.61T = operating cash COP 45.13T − maintenance capex COP 9.52T
  Industry peers: median 20%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 27% of revenue this year, a 18% median across 10 years.

• Are earnings backed by cash? 3.26×
  Cash-backed
  Cash from ops COP 45.13T ÷ net income COP 13.84T
  What this means

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? 44%
  Returns about half
  Dividends + buybacks COP 15.57T ÷ Owner Earnings COP 35.61T
  What this means

  Of COP 35.61T Owner Earnings, COP 15.57T (44%) went back to shareholders, COP 15.57T dividends, COP 0 buybacks. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.

• Investing or harvesting? 0.63×
  Harvesting
  Capex COP 9.52T ÷ depreciation COP 15.20T
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 2 of 5 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size —
  Revenue ≥ $2B (a dollar floor) · COP 133.33T
  What this means

  Big enough to weather a storm. Graham's floor is a dollar figure — about $2B of revenue as a conservative modern stand-in. This company reports in its home currency and we carry no exchange rate, so we show the figure and leave the size bar for you to apply rather than convert it with a number we don't have.

• Strong liquidity Near
  Current ratio ≥ 2× · 1.53×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Miss
  Debt ≤ working capital · COP 119.97T vs COP 21.02T WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Earnings stability Near
  A profit every year (10-yr record) · 1 loss year
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record Pass
  Uninterrupted dividends · paid every year (10)
  What this means

  An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.

• Earnings growth Pass
  Earnings +33% over the record · +2634%
  What this means

  At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are COP 539.17/share (latest year COP 336.63), the averaged base the calculator's gate runs on, and book value is COP 1942.15/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2015–2024

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 9 of 10
  What this means

  Lost money in 1 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 3 of 9 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin 17% → 32% (3-yr avg ends)

  In the filing’s words The record and the words agree: the margin widened and the filing attributes the gain to its own pricing, not volume alone.

  What this means

  Through the cycle the operating margin widened — about 17% early to 32% lately, median 29% — pricing power intact or improving.

• Reinvestment, incremental ROIC 24%
  What this means

  Every extra dollar the business reinvested came back at a high incremental return — the lens GBM read for a moat that reinvests rather than merely harvests. The record and the 10-K are where you check whether the rate holds.

• Owner earnings growth +13%/yr
  What this means

  Owner earnings grew about 13% a year over the record.

• Worst year 2015 · 4.1% op. margin
  What this means

  Stayed profitable even in its hardest year, the resilience that survives recessions.

• Share count +0.0%/yr
  What this means

  Roughly flat share count, little dilution, little buyback.

• Dividend record rising
  What this means

  Paid and raised the dividend across the record, the continuity Graham prized.