6098 · Recruit Holdings

Will it survive?

• Can it pay its interest? 59.9×
  Comfortable
  Operating income ¥630.6B ÷ interest expense ¥10.5B
  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? +¥539.9B
  Net cash
  Cash ¥725.6B − debt ¥185.6B
  What this means

  Cash and short-term investments exceed every dollar of debt by ¥539.9B, on net the company owes nothing, and can act from strength when others can't. 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? -40d
  Negative, funded by others
  DSO 63 + DIO 0 − DPO 103 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”), the company grows on other people's money. (Little or no inventory, a services / asset-light model, so the inventory leg is ~0.)

Is it a good business?

• Return on invested capital 24%
  High through the cycle
  10-yr median, range 5%–48%; 48% latest = NOPAT ¥498.1B ÷ invested capital ¥1.04T
  Industry peers: median 21%
  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 48% 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 12%
  Solid through the cycle
  9-yr median margin, range 8%–18%; latest ¥658.7B = operating cash ¥669.4B − maintenance capex ¥10.7B
  Industry peers: median 36%
  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 18% of revenue this year, a 12% median across 9 years.

• Are earnings backed by cash? 1.35×
  Cash-backed
  Cash from ops ¥669.4B ÷ net income ¥496.9B
  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? 108%
  Returned more than it generated
  Dividends + buybacks ¥714.1B ÷ Owner Earnings ¥658.7B
  What this means

  The company returned more than it generated: against ¥658.7B of Owner Earnings, ¥714.1B (108%) went back to shareholders, ¥35.4B dividends, ¥678.8B 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? 0.10×
  Harvesting
  Capex ¥10.7B ÷ depreciation ¥107.1B
  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% 8 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% → 14% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 7% early to 14% lately, median 10% — pricing power intact or improving.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Owner earnings growth +15%/yr
  What this means

  Owner earnings grew about 15% a year over the record.

• Worst year 2017 · 3.9% 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.