7733 · Olympus

Will it survive?

• Can it pay its interest? 10.4×
  Comfortable
  Operating income ¥97.1B ÷ interest expense ¥9.3B
  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? ¥51.5B · 0.5× operating profit
  Modest net debt
  Cash ¥188.0B − debt ¥239.6B
  What this means

  Netting ¥188.0B of cash and short-term investments against ¥239.6B of debt leaves ¥51.5B owed, about 0.5× a year's operating profit (2.5× 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? 3d
  Tight
  DSO 86 + DIO 0 − DPO 83 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. (Little or no inventory, a services / asset-light model, so the inventory leg is ~0.)

Is it a good business?

• Return on invested capital 12%
  Solid through the cycle
  10-yr median, range 4%–19%; 9% latest = NOPAT ¥76.7B ÷ invested capital ¥863.6B
  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 9% 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 6%
  Solid through the cycle
  9-yr median margin, range -0%–17%; latest ¥45.0B = operating cash ¥100.6B − maintenance capex ¥55.6B
  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 4% of revenue this year, a 6% median across 9 years.

• Are earnings backed by cash? 1.48×
  Cash-backed
  Cash from ops ¥100.6B ÷ net income ¥68.2B
  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? 161%
  Returned more than it generated
  Dividends + buybacks ¥72.6B ÷ Owner Earnings ¥45.0B
  What this means

  The company returned more than it generated: against ¥45.0B of Owner Earnings, ¥72.6B (161%) went back to shareholders, ¥22.6B 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? 0.83×
  Maintaining
  Capex ¥55.6B ÷ depreciation ¥67.2B
  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% 3 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 6% → 10% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 6% early to 10% lately, median 10% — pricing power intact or improving.

• Reinvestment, incremental ROIC 17%
  What this means

  Every extra dollar the business reinvested came back at a high incremental return — the lens GBM read for a moat that reinvests rather than merely harvests. The record and the 10-K are where you check whether the rate holds.

• Owner earnings growth +14%/yr
  What this means

  Owner earnings grew about 14% a year over the record.

• Worst year 2019 · 3.6% 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.