7270 · Subaru

Will it survive?

• Can it pay its interest? 2.9×
  Adequate
  Operating income ¥40.1B ÷ interest expense ¥14.0B
  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? +¥637.1B
  Net cash
  Cash ¥1.01T + ST investments ¥30.0B − debt ¥398.2B
  What this means

  Cash and short-term investments exceed every dollar of debt by ¥637.1B, 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? -4d
  Negative, funded by others
  DSO 36 + DIO 8 − DPO 49 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 15%
  Solid through the cycle
  10-yr median, range 1%–37%; 1% latest = NOPAT ¥31.7B ÷ invested capital ¥2.17T
  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 1% 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 4%
  Thin through the cycle
  8-yr median margin, range 2%–12%; latest ¥123.9B = operating cash ¥358.2B − maintenance capex ¥234.4B
  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 3% of revenue this year, a 4% median across 8 years.

• Are earnings backed by cash? 3.94×
  Cash-backed
  Cash from ops ¥358.2B ÷ net income ¥90.8B
  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? 113%
  Returned more than it generated
  Dividends + buybacks ¥140.4B ÷ Owner Earnings ¥123.9B
  What this means

  The company returned more than it generated: against ¥123.9B of Owner Earnings, ¥140.4B (113%) went back to shareholders, ¥90.4B dividends, ¥50.0B 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? 0.86×
  Maintaining
  Capex ¥234.4B ÷ depreciation ¥271.1B
  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% 4 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 10% → 6% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 10% early to 6% lately, median 6% — competition or costs are biting in.

• Reinvestment, incremental ROIC −1%
  What this means

  Reinvested capital came back at a negative incremental return over this window — the invested base grew while operating profit did not. The filings show where it went.

• Owner earnings growth +12%/yr
  What this means

  Owner earnings grew about 12% a year over the record.

• Worst year 2026 · 0.8% op. margin
  What this means

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

• Share count −0.8%/yr
  What this means

  The share count is shrinking, buybacks are quietly growing your slice of the business.

• Dividend record paid
  What this means

  Paid a dividend in 10 of the years on record.