KOF, Coca-Cola FEMSA

Will it survive?

• Can it pay its interest? 5.7×
  Comfortable
  Operating income MX$43.0B ÷ interest expense MX$7.5B
  What this means

  Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.

• How heavy is the debt, net of cash? MX$38.1B · 0.9× operating profit
  Modest net debt
  Cash MX$32.8B + ST investments MX$946M − debt MX$71.8B
  What this means

  Netting MX$33.7B of cash and short-term investments against MX$71.8B of debt leaves MX$38.1B owed, about 0.9× a year's operating profit (1.7× 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? 30d
  Tight
  DSO 24 + DIO 34 − DPO 29 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 12%
  Solid through the cycle
  8-yr median, range 8%–16%; 16% latest = NOPAT MX$28.8B ÷ invested capital MX$182.5B
  Industry peers: median 10%
  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 8 years (it ran 16% 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 11%
  Solid through the cycle
  10-yr median margin, range 10%–14%; latest MX$30.3B = operating cash MX$42.4B − maintenance capex MX$12.1B
  Industry peers: median 10%
  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 11% of revenue this year, a 11% median across 10 years. It chose to put MX$11.8B more into growth, so free cash flow this year was MX$18.5B — the gap is investment, not weakness.

• Are earnings backed by cash? 1.79×
  Cash-backed
  Cash from ops MX$42.4B ÷ net income MX$23.7B
  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? 42%
  Returns about half
  Dividends + buybacks MX$12.9B ÷ Owner Earnings MX$30.3B
  What this means

  Of MX$30.3B Owner Earnings, MX$12.9B (42%) went back to shareholders, MX$12.9B dividends, MX$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? 1.97×
  Expanding
  Capex MX$23.9B ÷ depreciation MX$12.1B
  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) · MX$279.8B
  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 Miss
  Current ratio ≥ 2× · 1.12×
  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 · MX$71.8B vs MX$8.0B 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 · +730%
  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 MX$1.24/share (latest year MX$1.41), the averaged base the calculator's gate runs on, and book value is MX$8.53/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 9% → 15% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 9% early to 15% lately, median 14% — pricing power intact or improving.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Owner earnings growth +6%/yr
  What this means

  Owner earnings grew about 6% a year over the record.

• Worst year 2017 · 0.1% op. margin
  What this means

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

• Dividend record rising
  What this means

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