9020 · East Japan Railway (JR East)

Will it survive?

• Can it pay its interest? 5.0×
  Adequate
  Operating income ¥414.3B ÷ interest expense ¥83.3B
  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? ¥4.84T · 11.7× operating profit
  Heavy net debt
  Cash ¥262.1B − debt ¥5.10T
  What this means

  Netting ¥262.1B of cash and short-term investments against ¥5.10T of debt leaves ¥4.84T owed, about 11.7× a year's operating profit (12.3× 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 -6%–7%; 4% latest = NOPAT ¥327.3B ÷ invested capital ¥7.74T
  Industry peers: median 6%
  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 -1%
  Consumes cash through the cycle
  10-yr median margin, range -54%–4%; latest (¥123.0B) = operating cash ¥765.1B − maintenance capex ¥888.1B
  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 -4% of revenue this year, a -1% median across 10 years.

• Are earnings backed by cash? 3.09×
  Cash-backed
  Cash from ops ¥765.1B ÷ net income ¥247.8B
  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? —
  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? 2.07×
  Expanding
  Capex ¥888.1B ÷ depreciation ¥428.7B
  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 8 of 10
  What this means

  Lost money in 2 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 16% → 13% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 16% early to 13% lately, median 13% — competition or costs are biting in.

• Reinvestment, incremental ROIC −4%
  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.

• Worst year 2021 · −29.5% op. margin
  What this means

  Operations went underwater in 2021, understand why before trusting the good years.

• Dividend record rising
  What this means

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