SPCE, Virgin Galactic Holdings Inc.

Will it survive?

• Can it pay its interest? -22.3×
  Does not cover its interest
  Operating income ($285M) ÷ interest expense $13M
  What this means

  A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.

• How heavy is the debt, net of cash? $113M
  Net debt against an operating loss
  Cash $145M + ST investments $162M − debt $420M
  What this means

  Netting $307M of cash and short-term investments against $420M of debt leaves $113M owed, with no operating profit this year to measure it against — understand that combination before anything else about the company. 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? 117d
  Long (60+ days)
  DSO 111 + DIO 82 − DPO 76 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 -59%
  Below average through the cycle
  5-yr median, range -68%–-50%; -41% latest = NOPAT ($225M) ÷ invested capital $549M
  Industry peers: median 6%
  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 5 years (it ran -41% 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 -7151%
  Consumes cash through the cycle
  9-yr median margin, range -102076%–-5233%; latest ($257M) = operating cash ($240M) − maintenance capex $16M
  Industry peers: median 9%
  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 -16621% of revenue this year, a -7151% median across 9 years. It chose to put $182M more into growth, so free cash flow this year was ($438M) — the gap is investment, not weakness. Treating stock comp as the real expense it is (less $19M of SBC) leaves ($275M).

• Are earnings backed by cash? ($240M)
  Loss, and burning cash
  Net income ($279M) · cash from operations ($240M)
  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 not.

How is the cash used?

• Where do the earnings go? —
  Not enough data
  What this means

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

• Investing or harvesting? 12.01×
  Expanding
  Capex $198M ÷ depreciation $16M
  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 · 0 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 Miss
  Revenue ≥ $2B · $2M
  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 Near
  Current ratio ≥ 2× · 1.78×
  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 · $420M vs $164M 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 (9-yr record) · 9 loss years
  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 · none paid
  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 —
  Earnings +33% over the record · —
  What this means

  Earnings were negative early in the record, a growth rate isn't meaningful.

• 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 $-3.73/share (latest year $-2.77), the averaged base the calculator's gate runs on, and book value is $2.72/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, 2017–2025

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

• Profitable years 0 of 9
  What this means

  Lost money in 9 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 0 of 5 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 −6472% → −10550% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about −6472% early to −10550% lately, median −7908% — 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.

• Worst year 2020 · −115665.5% op. margin
  What this means

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

• How management talks about it Promotional
  What this means

  The returns have faded, yet the filing reaches for a promoter’s vocabulary — world-class, best-in-class, disruptive — more than an owner’s. When the words sell harder than the results deliver, the gap is the thing to weigh.