7011 · Mitsubishi Heavy Industries

Will it survive?

• Can it pay its interest? 14.1×
  Comfortable
  Operating income ¥239.4B ÷ interest expense ¥17.0B
  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? ¥330.2B · 1.4× operating profit
  Modest net debt
  Cash ¥1.33T − debt ¥1.67T
  What this means

  Netting ¥1.33T of cash and short-term investments against ¥1.67T of debt leaves ¥330.2B owed, about 1.4× a year's operating profit (7.0× 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? -8d
  Negative, funded by others
  DSO 81 + DIO 4 − DPO 94 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 2%
  Below average through the cycle
  10-yr median, range 0%–6%; 6% latest = NOPAT ¥189.1B ÷ invested capital ¥3.42T
  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 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 15%
  High, recently turned positive
  latest ¥761.6B = operating cash ¥942.6B − maintenance capex ¥181.1B; positive each of the last 3 years, after an earlier loss stretch (10-yr median 4%)
  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 15% of revenue this year, a 4% median across 10 years.

• Are earnings backed by cash? 2.84×
  Cash-backed
  Cash from ops ¥942.6B ÷ net income ¥332.1B
  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? 11%
  Reinvests most of it
  Dividends + buybacks ¥81.1B ÷ Owner Earnings ¥761.6B
  What this means

  Of ¥761.6B Owner Earnings, ¥81.1B (11%) went back to shareholders, ¥80.9B dividends, ¥184M 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? —
  Not enough data
  What this means

  The filing data didn't include the inputs for this check.

Durability & moat, 2017–2026

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% 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 2% → 3% (3-yr avg ends)
  What this means

  Through the cycle the operating margin held roughly steady — about 2% early, 3% lately, median 1%.

• Reinvestment, incremental ROIC 7%
  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 +27%/yr
  What this means

  Owner earnings grew about 27% a year over the record.

• Worst year 2022 · 0.1% op. margin
  What this means

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

• Share count +0.0%/yr
  What this means

  Roughly flat share count, little dilution, little buyback.

• Dividend record rising
  What this means

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