5108 · Bridgestone

Will it survive?

• Can it pay its interest? 17.9×
  Comfortable
  Operating income ¥381.2B ÷ interest expense ¥21.3B
  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? ¥113.2B · 0.3× operating profit
  Modest net debt
  Cash ¥713.8B − debt ¥827.0B
  What this means

  Netting ¥713.8B of cash and short-term investments against ¥827.0B of debt leaves ¥113.2B owed, about 0.3× 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? 15d
  Tight
  DSO 90 + DIO 6 − DPO 81 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 11%
  Solid through the cycle
  10-yr median, range 2%–16%; 8% latest = NOPAT ¥301.2B ÷ invested capital ¥3.77T
  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 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 6%
  Solid through the cycle
  10-yr median margin, range 1%–11%; latest ¥409.4B = operating cash ¥660.4B − maintenance capex ¥251.1B
  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 9% of revenue this year, a 6% median across 10 years.

• Are earnings backed by cash? 2.02×
  Cash-backed
  Cash from ops ¥660.4B ÷ net income ¥327.3B
  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? 110%
  Returned more than it generated
  Dividends + buybacks ¥448.6B ÷ Owner Earnings ¥409.4B
  What this means

  The company returned more than it generated: against ¥409.4B of Owner Earnings, ¥448.6B (110%) went back to shareholders, ¥148.6B dividends, ¥300.0B 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? 0.71×
  Harvesting
  Capex ¥251.1B ÷ depreciation ¥353.2B
  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% 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 12% → 10% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 12% early to 10% lately, median 11% — competition or costs are biting in.

• Reinvestment, incremental ROIC 1%
  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 +4%/yr
  What this means

  Owner earnings grew about 4% a year over the record.

• Worst year 2020 · 2.1% op. margin
  What this means

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

• Share count −1.4%/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.