MDLN, Medline Inc.

Will it survive?

• Can it pay its interest? 2.3×
  Adequate
  Operating income $2.2B ÷ interest expense $945M
  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? $10.6B · 4.8× operating profit
  Heavy net debt
  Cash $1.9B − debt $12.6B
  What this means

  Netting $1.9B of cash and short-term investments against $12.6B of debt leaves $10.6B owed, about 4.8× a year's operating profit (5.7× 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? 112d
  Long (60+ days)
  DSO 45 + DIO 83 − DPO 17 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 10%
  Solid
  NOPAT $2.1B ÷ invested capital $21.4B (debt + equity − cash)
  Industry peers: median 12%
  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. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin 6%
  Solid through the cycle
  3-yr median margin, range 5%–6%; latest $1.3B = operating cash $1.7B − maintenance capex $447M
  Industry peers: median 14%
  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 5% of revenue this year, a 6% median across 3 years. Treating stock comp as the real expense it is (less $76M of SBC) leaves $1.2B.

• Are earnings backed by cash? 1.50×
  Cash-backed
  Cash from ops $1.7B ÷ net income $1.2B
  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? 3%
  Reinvests most of it
  Dividends + buybacks $33M ÷ Owner Earnings $1.3B
  What this means

  Of $1.3B Owner Earnings, $33M (3%) went back to shareholders, $0 dividends, $33M buybacks. But the buybacks barely exceed stock issued to employees ($76M SBC), net of dilution, little was truly returned. 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? 0.44×
  Harvesting
  Capex $447M ÷ depreciation $1.0B
  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 3 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 Pass
  Revenue ≥ $2B · $28.4B
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Pass
  Current ratio ≥ 2× · 4.29×
  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 · $12.6B vs $8.2B 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.

• 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 $1.04/share (latest year $1.41), the averaged base the calculator's gate runs on, and book value is $13.11/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.