3402 · Toray Industries

Will it survive?

• Can it pay its interest? 4.9×
  Adequate
  Operating income ¥97.2B ÷ interest expense ¥19.7B
  What this means

  Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.

• How heavy is the debt, net of cash? ¥640.3B · 6.6× operating profit
  Heavy net debt
  Cash ¥265.3B − debt ¥905.6B
  What this means

  Netting ¥265.3B of cash and short-term investments against ¥905.6B of debt leaves ¥640.3B owed, about 6.6× a year's operating profit (9.3× 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 4%
  Below average through the cycle
  10-yr median, range 2%–7%; 3% latest = NOPAT ¥76.8B ÷ invested capital ¥2.44T
  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 3% 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 3%
  Thin through the cycle
  10-yr median margin, range 2%–5%; latest ¥65.3B = operating cash ¥211.8B − maintenance capex ¥146.5B
  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 3% of revenue this year, a 3% median across 10 years.

• Are earnings backed by cash? 2.66×
  Cash-backed
  Cash from ops ¥211.8B ÷ net income ¥79.5B
  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? 216%
  Returned more than it generated
  Dividends + buybacks ¥140.8B ÷ Owner Earnings ¥65.3B
  What this means

  The company returned more than it generated: against ¥65.3B of Owner Earnings, ¥140.8B (216%) went back to shareholders, ¥29.1B dividends, ¥111.7B 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? 1.11×
  Maintaining
  Capex ¥146.5B ÷ depreciation ¥131.6B
  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 7% → 4% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 7% early to 4% lately, median 5% — competition or costs are biting in.

• Reinvestment, incremental ROIC −8%
  What this means

  Reinvested capital came back at a negative incremental return over this window — the invested base grew while operating profit did not. The filings show where it went.

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

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

• Worst year 2024 · 2.3% op. margin
  What this means

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

• Share count −0.9%/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.