NATH, Nathan's Famous Inc.

Will it survive?

• Can it pay its interest? 10.5×
  Comfortable
  Operating income $30M ÷ interest expense $3M
  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? $24M · 0.8× operating profit
  Modest net debt
  Cash $24M − debt $48M
  What this means

  Netting $24M of cash and short-term investments against $48M of debt leaves $24M owed, about 0.8× a year's operating profit (1.6× 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? —
  Not enough data
  What this means

  The filing data didn't include the inputs for this check.

Is it a good business?

• Return on invested capital —
  Not enough data
  Industry peers: median 1%
  What this means

  The filing data didn't include the inputs for this check.

• Owner-earnings margin 14%
  Solid through the cycle
  10-yr median margin, range 10%–18%; latest $18M = operating cash $18M − maintenance capex $370K
  Industry peers: median 5%
  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 14% median across 10 years. Treating stock comp as the real expense it is (less $1M of SBC) leaves $17M.

• Are earnings backed by cash? 0.91×
  Mostly cash-backed
  Cash from ops $18M ÷ net income $20M
  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 $8M ÷ Owner Earnings $18M
  What this means

  Of $18M Owner Earnings, $8M (42%) went back to shareholders, $8M dividends, $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? 0.40×
  Harvesting
  Capex $370K ÷ depreciation $925K
  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 · 3 of 6 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 Miss
  Revenue ≥ $2B · $162M
  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× · 2.49×
  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 · $48M vs $28M 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 Pass
  A profit every year (10-yr record) · no losses
  What this means

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

• Dividend record Miss
  Uninterrupted dividends · 5 of 8 tagged yrs
  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. 2 years of this record are untagged in the data, with the dividend paid on both sides; a lone missing tag is treated as unknown, not a suspension, so the streak is judged on the tagged years.

• Earnings growth Pass
  Earnings +33% over the record · +101%
  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 $5.18/share (latest year $4.89), the averaged base the calculator's gate runs on, and book value is $-3.47/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, 2017–2026

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

• Profitable years 10 of 10
  What this means

  Never lost money over the record, the earnings stability Graham insisted on.

• Return on capital ≥ 15% 9 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 27% → 22% (3-yr avg ends)

  In the filing’s words The filing attributes gains to higher prices, but the margin in the record has not followed — the claim outruns the result here.

  What this means

  Through the cycle the operating margin slipped — about 27% early to 22% lately, median 26% — competition or costs are biting in.

• Reinvestment, incremental ROIC —
  What this means

  The reinvested base moved too little against the change in profit to read a reliable return on it here — the figure would be a small-denominator artifact, not a moat. Judge this one on the owner-earnings record and the cash it returns instead.

• Owner earnings growth +5%/yr
  What this means

  Owner earnings grew about 5% a year over the record.

• Worst year 2026 · 18.6% op. margin
  What this means

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

• Share count −0.2%/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.