WINA, Winmark Corporation

Will it survive?

• Can it pay its interest? 22.3×
  Comfortable
  Operating income $55M ÷ interest expense $2M
  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? $37M · 0.7× operating profit
  Modest net debt
  Cash $10M − debt $48M
  What this means

  Netting $10M of cash and short-term investments against $48M of debt leaves $37M owed, about 0.7× a year's operating profit (0.9× 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? -148d
  Negative, funded by others
  DSO 6 + DIO 43 − DPO 197 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.

Is it a good business?

• Return on invested capital —
  Not meaningful here
  Invested capital ($16M) = debt $48M + equity ($54M) − cash
  Industry peers: median 6%
  What this means

  Invested capital is near zero or negative, usually years of buybacks pulling equity down. ROIC explodes or flips sign and stops meaning anything. Judge this one on Owner Earnings instead.

• Owner-earnings margin 52%
  High through the cycle
  10-yr median margin, range 36%–69%; latest $45M = operating cash $45M − maintenance capex $192K
  Industry peers: median 1%
  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 52% of revenue this year, a 52% median across 10 years. Treating stock comp as the real expense it is (less $2M of SBC) leaves $42M.

• Are earnings backed by cash? 1.08×
  Cash-backed
  Cash from ops $45M ÷ net income $42M
  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? 115%
  Returned more than it generated
  Dividends + buybacks $52M ÷ Owner Earnings $45M
  What this means

  The company returned more than it generated: against $45M of Owner Earnings, $52M (115%) went back to shareholders, $49M dividends, $2M buybacks — the excess came from the balance sheet or borrowing, not the year's operations. Net of $2M stock comp, the real buyback was about $136K. Sustained, that pattern draws down cash or adds debt; the net-debt line above shows where it stands.

• Investing or harvesting? 0.26×
  Harvesting
  Capex $192K ÷ depreciation $747K
  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 · $86M
  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 $8M 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 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 · +58%
  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 $11.30/share (latest year $11.60), the averaged base the calculator's gate runs on, and book value is $-14.94/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, 2016–2025

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% 4 of 4 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 57% → 64% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 57% early to 64% lately, median 61% — 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 · 55.6% op. margin
  What this means

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

• Share count −1.8%/yr
  What this means

  The share count is shrinking, buybacks are quietly growing your slice of the business.

• Dividend record rising
  What this means

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