NCMI, National CineMedia Inc.

Will it survive?

• Can it pay its interest? —
  No meaningful interest burden
  Little or no interest expense reported
  What this means

  Little or no interest expense reported, the business isn't leaning on lenders to operate.

• How heavy is the debt, net of cash? +$23M
  Net cash
  Cash $35M + ST investments $100K − debt $12M
  What this means

  Cash and short-term investments exceed every dollar of debt by $23M, on net the company owes nothing, and can act from strength when others can't. It also holds $300K in longer-dated marketable securities; counting those, it sits at net cash of $23M. 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? -588d
  Negative, funded by others
  DSO 145 + DIO 0 − DPO 733 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”), the company grows on other people's money. (Little or no inventory, a services / asset-light model, so the inventory leg is ~0.)

Is it a good business?

• Return on invested capital -3%
  Below average through the cycle
  10-yr median, range -12%–24%; -3% latest = NOPAT ($11M) ÷ invested capital $353M
  Industry peers: median 0%
  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 10 years (it ran -3% 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 23%
  High through the cycle
  10-yr median margin, range -88%–52%; latest $3M = operating cash $8M − maintenance capex $6M
  Industry peers: median 2%
  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 1% of revenue this year, a 23% median across 10 years. Treating stock comp as the real expense it is (less $9M of SBC) leaves ($7M).

• Are earnings backed by cash? $8M
  Loss, but cash-generative
  Net income ($11M) · cash from operations $8M
  What this means

  The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did.

How is the cash used?

• Where do the earnings go? 1193%
  Returned more than it generated
  Dividends + buybacks $33M ÷ Owner Earnings $3M
  What this means

  The company returned more than it generated: against $3M of Owner Earnings, $33M (1193%) went back to shareholders, $11M dividends, $22M buybacks — the excess came from the balance sheet or borrowing, not the year's operations. Net of $9M stock comp, the real buyback was about $13M. Sustained, that pattern draws down cash or adds debt; the net-debt line above shows where it stands.

• Investing or harvesting? 0.86×
  Maintaining
  Capex $6M ÷ depreciation $7M
  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 · 4 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 · $243M
  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× · 2.22×
  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 Pass
  Debt ≤ working capital · $12M vs $76M 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 Miss
  A profit every year (10-yr record) · 5 loss years
  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 · +456%
  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 $2.39/share (latest year $-0.11), the averaged base the calculator's gate runs on, and book value is $4.00/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, 2016–2026

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

• Profitable years 5 of 10
  What this means

  Lost money in 5 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 3 of 10 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 37% → −10% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 37% early to −10% lately, median −6% — competition or costs are biting in.

• 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 −14%/yr
  What this means

  Owner earnings shrank about 14% a year over the record.

• Worst year 2020 · −67.5% op. margin
  What this means

  Operations went underwater in 2020, understand why before trusting the good years.

• Share count +4.5%/yr
  What this means

  The share count is rising, dilution works against you on a per-share basis.

• Dividend record paid
  What this means

  Paid a dividend in 10 of the years on record.