6472 · NTN

Will it survive?

• Can it pay its interest? 4.0×
  Adequate
  Operating income ¥31.0B ÷ interest expense ¥7.8B
  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? ¥189.2B · 6.1× operating profit
  Heavy net debt
  Cash ¥131.3B − debt ¥320.5B
  What this means

  Netting ¥131.3B of cash and short-term investments against ¥320.5B of debt leaves ¥189.2B owed, about 6.1× a year's operating profit (10.3× 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? 91d
  Long (60+ days)
  DSO 53 + DIO 72 − DPO 34 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 4%
  Below average through the cycle
  10-yr median, range -1%–6%; 6% latest = NOPAT ¥24.5B ÷ invested capital ¥387.0B
  Industry peers: median 9%
  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 3%
  Thin, recently turned positive
  latest ¥28.1B = operating cash ¥57.2B − maintenance capex ¥29.1B; positive each of the last 3 years, after an earlier loss stretch (10-yr median 3%)
  Industry peers: median 6%
  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? 4.44×
  Cash-backed
  Cash from ops ¥57.2B ÷ net income ¥12.9B
  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? 21%
  Reinvests most of it
  Dividends + buybacks ¥5.8B ÷ Owner Earnings ¥28.1B
  What this means

  Of ¥28.1B Owner Earnings, ¥5.8B (21%) went back to shareholders, ¥5.8B dividends, ¥0 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? 0.72×
  Harvesting
  Capex ¥29.1B ÷ depreciation ¥40.5B
  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 6 of 10
  What this means

  Lost money in 4 year(s), look at what happened there before trusting the average.

• 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 5% → 3% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 5% early to 3% lately, median 3% — competition or costs are biting in.

• 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 −0%/yr
  What this means

  Owner earnings shrank about 0% a year over the record.

• Worst year 2021 · −0.6% op. margin
  What this means

  Operations went underwater in 2021, understand why before trusting the good years.

• Share count +1.3%/yr
  What this means

  The share count is rising, dilution works against you on a per-share basis.

• Dividend record rising
  What this means

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