4543 · Terumo

Will it survive?

• Can it pay its interest? 53.7×
  Comfortable
  Operating income ¥176.3B ÷ interest expense ¥3.3B
  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? ¥99.3B · 0.6× operating profit
  Modest net debt
  Cash ¥280.5B − debt ¥379.8B
  What this means

  Netting ¥280.5B of cash and short-term investments against ¥379.8B of debt leaves ¥99.3B owed, about 0.6× a year's operating profit (2.2× 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? 51d
  Tight
  DSO 69 + DIO 42 − DPO 61 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 8%
  Solid through the cycle
  10-yr median, range 6%–12%; 8% latest = NOPAT ¥139.3B ÷ invested capital ¥1.68T
  Industry peers: median 18%
  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 8% 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 10%
  Solid through the cycle
  9-yr median margin, range 8%–14%; latest ¥145.6B = operating cash ¥230.9B − maintenance capex ¥85.2B
  Industry peers: median 11%
  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 13% of revenue this year, a 10% median across 9 years.

• Are earnings backed by cash? 1.70×
  Cash-backed
  Cash from ops ¥230.9B ÷ net income ¥135.9B
  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? 28%
  Reinvests most of it
  Dividends + buybacks ¥41.3B ÷ Owner Earnings ¥145.6B
  What this means

  Of ¥145.6B Owner Earnings, ¥41.3B (28%) went back to shareholders, ¥41.3B dividends, ¥1M 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? 0.89×
  Maintaining
  Capex ¥85.2B ÷ depreciation ¥95.4B
  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, 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 16% → 15% (3-yr avg ends)
  What this means

  Through the cycle the operating margin held roughly steady — about 16% early, 15% lately, median 16%.

• Reinvestment, incremental ROIC 8%
  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 +10%/yr
  What this means

  Owner earnings grew about 10% a year over the record.

• Worst year 2017 · 10.6% 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.