6857 · Advantest

Will it survive?

• Can it pay its interest? 181.2×
  Comfortable
  Operating income ¥499.1B ÷ interest expense ¥2.8B
  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? +¥319.8B
  Net cash
  Cash ¥340.0B − debt ¥20.2B
  What this means

  Cash and short-term investments exceed every dollar of debt by ¥319.8B, 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? -32d
  Negative, funded by others
  DSO 74 + DIO 23 − DPO 129 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.

Is it a good business?

• Return on invested capital 44%
  Very high (≥25%) through the cycle
  9-yr median, range 7%–83%; 83% latest = NOPAT ¥394.3B ÷ invested capital ¥476.0B
  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 9 years (it ran 83% 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 15%
  Solid through the cycle
  9-yr median margin, range 3%–34%; latest ¥309.6B = operating cash ¥335.2B − maintenance capex ¥25.6B
  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 27% of revenue this year, a 15% median across 9 years. Treating stock comp as the real expense it is (less ¥26.1B of SBC) leaves ¥283.4B.

• Are earnings backed by cash? 0.89×
  Mostly cash-backed
  Cash from ops ¥335.2B ÷ net income ¥375.4B
  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? 48%
  Returns about half
  Dividends + buybacks ¥150.1B ÷ Owner Earnings ¥309.6B
  What this means

  Of ¥309.6B Owner Earnings, ¥150.1B (48%) went back to shareholders, ¥35.8B dividends, ¥114.3B buybacks. Net of ¥26.1B stock comp, the real buyback was about ¥88.2B. 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? 1.29×
  Expanding
  Capex ¥33.0B ÷ depreciation ¥25.6B
  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% 7 of 8 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 13% → 30% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 13% early to 30% lately, median 23% — pricing power intact or improving.

• Reinvestment, incremental ROIC —
  What this means

  The reinvested base moved too little against the change in profit to read a reliable return on it here — the figure would be a small-denominator artifact, not a moat. Judge this one on the owner-earnings record and the cash it returns instead.

• Owner earnings growth +32%/yr
  What this means

  Owner earnings grew about 32% a year over the record.

• Worst year 2017 · 3.0% 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.