9697 · Capcom

Will it survive?

• Can it pay its interest? 1298.2×
  Comfortable
  Operating income ¥75.3B ÷ interest expense ¥58M
  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? +¥59.8B
  Net cash
  Cash ¥102.8B − debt ¥43.1B
  What this means

  Cash and short-term investments exceed every dollar of debt by ¥59.8B, 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? 57d
  Tight
  DSO 62 + DIO 12 − DPO 17 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 32%
  Very high (≥25%) through the cycle
  10-yr median, range 15%–66%; 31% latest = NOPAT ¥59.5B ÷ invested capital ¥194.8B
  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 31% 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 18%
  High through the cycle
  10-yr median margin, range 0%–40%; latest ¥26.2B = operating cash ¥31.4B − maintenance capex ¥5.2B
  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 13% of revenue this year, a 18% median across 10 years. It chose to put ¥8.4B more into growth, so free cash flow this year was ¥17.8B — the gap is investment, not weakness.

• Are earnings backed by cash? 0.57×
  Thinly cash-backed
  Cash from ops ¥31.4B ÷ net income ¥54.6B
  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? 68%
  Returns about half
  Dividends + buybacks ¥17.9B ÷ Owner Earnings ¥26.2B
  What this means

  Of ¥26.2B Owner Earnings, ¥17.9B (68%) went back to shareholders, ¥17.9B dividends, ¥1M buybacks. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.

• Investing or harvesting? 2.61×
  Expanding
  Capex ¥13.6B ÷ depreciation ¥5.2B
  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% 10 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 17% → 38% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 17% early to 38% lately, median 36% — pricing power intact or improving.

• Reinvestment, incremental ROIC 57%
  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 +12%/yr
  What this means

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

• Worst year 2017 · 15.7% 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.