3382 · Seven & i Holdings

Will it survive?

• Can it pay its interest? 14.2×
  Comfortable
  Operating income ¥423.0B ÷ interest expense ¥29.8B
  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? ¥3.37T · 8.0× operating profit
  Heavy net debt
  Cash ¥426.1B − debt ¥3.79T
  What this means

  Netting ¥426.1B of cash and short-term investments against ¥3.79T of debt leaves ¥3.37T owed, about 8.0× a year's operating profit (9.0× 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? 12d
  Tight
  DSO 12 + DIO 11 − DPO 11 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 7%
  Below average through the cycle
  10-yr median, range 6%–15%; 6% latest = NOPAT ¥334.2B ÷ invested capital ¥6.00T
  Industry peers: median 16%
  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 6% 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 6%
  Solid through the cycle
  10-yr median margin, range 3%–7%; latest ¥333.1B = operating cash ¥666.7B − maintenance capex ¥333.6B
  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 4% of revenue this year, a 6% median across 10 years.

• Are earnings backed by cash? 2.28×
  Cash-backed
  Cash from ops ¥666.7B ÷ net income ¥292.8B
  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? 214%
  Returned more than it generated
  Dividends + buybacks ¥713.6B ÷ Owner Earnings ¥333.1B
  What this means

  The company returned more than it generated: against ¥333.1B of Owner Earnings, ¥713.6B (214%) went back to shareholders, ¥113.6B dividends, ¥600.0B buybacks — the excess came from the balance sheet or borrowing, not the year's operations. Sustained, that pattern draws down cash or adds debt; the net-debt line above shows where it stands.

• Investing or harvesting? 0.87×
  Maintaining
  Capex ¥333.6B ÷ depreciation ¥382.0B
  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% 1 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 8% → 5% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 8% early to 5% lately, median 5% — competition or costs are biting in.

• Reinvestment, incremental ROIC 2%
  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 +3%/yr
  What this means

  Owner earnings grew about 3% a year over the record.

• Worst year 2025 · 4.1% op. margin
  What this means

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

• Dividend record rising
  What this means

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