1925 · Daiwa House Industry

Will it survive?

• Can it pay its interest? 13.9×
  Comfortable
  Operating income ¥614.9B ÷ interest expense ¥44.3B
  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? ¥2.79T · 4.5× operating profit
  Heavy net debt
  Cash ¥424.6B + ST investments ¥195M − debt ¥3.21T
  What this means

  Netting ¥424.8B of cash and short-term investments against ¥3.21T of debt leaves ¥2.79T owed, about 4.5× a year's operating profit (5.2× 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 10%
  Solid through the cycle
  10-yr median, range 8%–14%; 9% latest = NOPAT ¥485.8B ÷ invested capital ¥5.44T
  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 10 years (it ran 9% 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 5%
  Solid through the cycle
  10-yr median margin, range 1%–9%; latest ¥48.9B = operating cash ¥189.3B − maintenance capex ¥140.3B
  Industry peers: median 7%
  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 5% median across 10 years. It chose to put ¥353.5B more into growth, so free cash flow this year was (¥304.6B) — the gap is investment, not weakness. Treating stock comp as the real expense it is (less ¥893M of SBC) leaves ¥48.0B.

• Are earnings backed by cash? 0.54×
  Thinly cash-backed
  Cash from ops ¥189.3B ÷ net income ¥350.6B
  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? 196%
  Returned more than it generated
  Dividends + buybacks ¥95.9B ÷ Owner Earnings ¥48.9B
  What this means

  The company returned more than it generated: against ¥48.9B of Owner Earnings, ¥95.9B (196%) went back to shareholders, ¥95.9B dividends, ¥14M buybacks — the excess came from the balance sheet or borrowing, not the year's operations. But the buybacks barely exceed stock issued to employees (¥893M SBC), net of dilution, little was truly returned. Sustained, that pattern draws down cash or adds debt; the net-debt line above shows where it stands.

• Investing or harvesting? 3.52×
  Expanding
  Capex ¥493.8B ÷ depreciation ¥140.3B
  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, 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% 0 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 9% → 10% (3-yr avg ends)
  What this means

  Through the cycle the operating margin held roughly steady — about 9% early, 10% lately, median 9%.

• Reinvestment, incremental ROIC 5%
  What this means

  Reinvested capital came back at only a modest incremental return — near the cost of capital, where extra growth adds little per dollar. The record shows whether it is a soft stretch or a thinning moat.

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

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

• Worst year 2024 · 8.5% op. margin
  What this means

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

• Share count −0.1%/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.