1605 · INPEX

Will it survive?

• Can it pay its interest? 13.8×
  Comfortable
  Operating income ¥1.14T ÷ interest expense ¥82.2B
  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? ¥1.08T · 0.9× operating profit
  Modest net debt
  Cash ¥168.4B − debt ¥1.24T
  What this means

  Netting ¥168.4B of cash and short-term investments against ¥1.24T of debt leaves ¥1.08T owed, about 0.9× a year's operating profit (1.1× 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? -44d
  Negative, funded by others
  DSO 48 + DIO 0 − DPO 92 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 11%
  Solid through the cycle
  9-yr median, range 5%–24%; 15% latest = NOPAT ¥897.0B ÷ invested capital ¥5.82T
  Industry peers: median 21%
  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 9 years (it ran 15% 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 25%
  High through the cycle
  9-yr median margin, range 14%–36%; latest ¥691.3B = operating cash ¥693.9B − maintenance capex ¥2.6B
  Industry peers: median 36%
  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 34% of revenue this year, a 25% median across 9 years.

• Are earnings backed by cash? 1.76×
  Cash-backed
  Cash from ops ¥693.9B ÷ net income ¥393.8B
  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? 29%
  Reinvests most of it
  Dividends + buybacks ¥201.8B ÷ Owner Earnings ¥691.3B
  What this means

  Of ¥691.3B Owner Earnings, ¥201.8B (29%) went back to shareholders, ¥111.4B dividends, ¥90.4B 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? 0.01×
  Harvesting
  Capex ¥2.6B ÷ depreciation ¥351.4B
  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.

Durability & moat, 2016–2025

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

• Profitable years 9 of 10
  What this means

  Lost money in 1 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 4 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 45% → 55% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 45% early to 55% lately, median 50% — pricing power intact or improving.

• Reinvestment, incremental ROIC 35%
  What this means

  Every extra dollar the business reinvested came back at a high incremental return — the lens GBM read for a moat that reinvests rather than merely harvests. The record and the 10-K are where you check whether the rate holds.

• Owner earnings growth +20%/yr
  What this means

  Owner earnings grew about 20% a year over the record.

• Worst year 2020 · 32.2% op. margin
  What this means

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

• Share count −1.6%/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.