8830 · Sumitomo Realty & Development

Will it survive?

• Can it pay its interest? 11.0×
  Comfortable
  Operating income ¥299.2B ÷ interest expense ¥27.2B
  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? ¥3.74T · 12.5× operating profit
  Heavy net debt
  Cash ¥58.3B − debt ¥3.80T
  What this means

  Netting ¥58.3B of cash and short-term investments against ¥3.80T of debt leaves ¥3.74T owed, about 12.5× a year's operating profit (12.7× 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? —
  Not enough data
  What this means

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

Is it a good business?

• Return on invested capital 4%
  Below average through the cycle
  10-yr median, range 4%–4%; 4% latest = NOPAT ¥236.3B ÷ invested capital ¥5.77T
  Industry peers: median 7%
  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 4% 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%
  Consumes cash through the cycle
  10-yr median margin, range -30%–9%; latest (¥18.4B) = operating cash ¥127.3B − maintenance capex ¥145.6B
  Industry peers: median 7%
  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 -2% of revenue this year, a -3% median across 10 years.

• Are earnings backed by cash? 0.60×
  Thinly cash-backed
  Cash from ops ¥127.3B ÷ net income ¥212.5B
  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? —
  No surplus to allocate
  What this means

  The business didn't generate positive Owner Earnings this year, so any distributions came from the balance sheet or borrowing, not from operations.

• Investing or harvesting? 1.91×
  Expanding
  Capex ¥145.6B ÷ depreciation ¥76.3B
  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% 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 21% → 27% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 21% early to 27% lately, median 24% — pricing power intact or improving.

• Reinvestment, incremental ROIC 3%
  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.

• Worst year 2017 · 20.3% 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.