9468 · Kadokawa

Will it survive?

• Can it pay its interest? 96.5×
  Comfortable
  Operating income ¥8.1B ÷ interest expense ¥84M
  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? +¥80.7B
  Net cash
  Cash ¥90.8B + ST investments ¥829M − debt ¥10.9B
  What this means

  Cash and short-term investments exceed every dollar of debt by ¥80.7B, 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? 107d
  Long (60+ days)
  DSO 98 + DIO 82 − DPO 74 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.

Is it a good business?

• Return on invested capital 8%
  Below average through the cycle
  10-yr median, range 2%–13%; 4% latest = NOPAT ¥6.4B ÷ invested capital ¥149.4B
  Industry peers: median 9%
  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 0%
  Thin, recently turned positive
  latest ¥689M = operating cash ¥3.4B − maintenance capex ¥2.7B; positive each of the last 3 years, after an earlier loss stretch (10-yr median 3%)
  Industry peers: median 6%
  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 0% of revenue this year, a 3% median across 10 years. Treating stock comp as the real expense it is (less ¥2.0B of SBC) leaves (¥1.3B).

• Are earnings backed by cash? 2.68×
  Cash-backed
  Cash from ops ¥3.4B ÷ net income ¥1.3B
  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? 1069%
  Returned more than it generated
  Dividends + buybacks ¥7.4B ÷ Owner Earnings ¥689M
  What this means

  The company returned more than it generated: against ¥689M of Owner Earnings, ¥7.4B (1069%) went back to shareholders, ¥4.4B dividends, ¥2.9B buybacks — the excess came from the balance sheet or borrowing, not the year's operations. Net of ¥2.0B stock comp, the real buyback was about ¥906M. Sustained, that pattern draws down cash or adds debt; the net-debt line above shows where it stands.

• Investing or harvesting? 0.31×
  Harvesting
  Capex ¥2.7B ÷ depreciation ¥8.7B
  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 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% → 5% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 2% early to 5% lately, median 4% — pricing power intact or improving.

• Reinvestment, incremental ROIC 18%
  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 +8%/yr
  What this means

  Owner earnings grew about 8% a year over the record.

• Worst year 2019 · 1.3% 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.