MASI, Masimo

Will it survive?

• Can it pay its interest? 9.3×
  Comfortable
  Operating income $310M ÷ interest expense $33M
  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? $372M · 1.2× operating profit
  Modest net debt
  Cash $152M − debt $524M
  What this means

  Netting $152M of cash and short-term investments against $524M of debt leaves $372M owed, about 1.2× a year's operating profit (1.7× 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? 240d
  Long (60+ days)
  DSO 66 + DIO 239 − DPO 65 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 —
  Not enough data
  Industry peers: median 4%
  What this means

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

• Owner-earnings margin 14%
  Solid through the cycle
  10-yr median margin, range -1%–56%; latest $198M = operating cash $218M − maintenance capex $19M
  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 13% of revenue this year, a 14% median across 10 years. Treating stock comp as the real expense it is (less $36M of SBC) leaves $163M.

• Are earnings backed by cash? $218M
  Loss, but cash-generative
  Net income ($152M) · cash from operations $218M
  What this means

  The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did.

How is the cash used?

• Where do the earnings go? 183%
  Returned more than it generated
  Dividends + buybacks $364M ÷ Owner Earnings $198M — this fiscal year
  What this means

  The company returned more than it generated: against $198M of Owner Earnings, $364M (183%) went back to shareholders, $0 dividends, $364M buybacks — the excess came from the balance sheet or borrowing, not the year's operations. Net of $36M stock comp, the real buyback was about $328M. Sustained, that pattern draws down cash or adds debt; the net-debt line above shows where it stands. This year's proportion is 183%; across the record (2016–2025) it is 71%, the capital-allocation section below.

• Investing or harvesting? 0.50×
  Harvesting
  Capex $19M ÷ depreciation $39M
  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.

The promise and the pay packet

• Is the buyback buying ownership, or mopping up? 2.3%
  The count is edging down
  Stock compensation $36M (fiscal 2025), 2.3% of revenue · repurchases $364M · diluted shares -1.8% since 2022
  What this means

  Stock handed to employees is a real cost paid in the owner's own currency: it is charged against profit, but the shares it creates are permanent. Many companies repurchase stock at the same time, which looks like a return of capital and often is not — if the count barely moves, the cash merely cancelled the pay packet and bought the owner nothing. The three states worth telling apart are a count genuinely shrinking, a count standing still despite large repurchases, and a count rising because the issuance was never offset at all.

Graham’s defensive tests · 2 of 5 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size Near
  Revenue ≥ $2B · $1.5B
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Pass
  Current ratio ≥ 2× · 2.49×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Pass
  Debt ≤ working capital · $524M vs $554M WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Earnings stability Miss
  A profit every year (10-yr record) · 2 loss years
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record —
  Uninterrupted dividends · no dividend line tagged in the data
  What this means

  An unbroken dividend was Graham's mark of durability. This record carries no dividends-paid line in any year — common for partnerships, whose distributions file under tags the chain doesn't read — so the criterion is withheld rather than judged on silence.

• Earnings growth Miss
  Earnings +33% over the record · −160%
  What this means

  At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $-2.39/share (latest year $-2.89), the averaged base the calculator's gate runs on. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2016–2025

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% 1 of 4 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 36% → 13% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 36% early to 13% lately, median 22% — competition or costs are biting in.

• Reinvestment, incremental ROIC −12%
  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.

• Owner earnings growth −2%/yr
  What this means

  Owner earnings shrank about 2% a year over the record.

• Worst year 2024 · 4.5% op. margin
  What this means

  Stayed profitable even in its hardest year, the resilience that survives recessions.

• Share count +0.2%/yr
  What this means

  Roughly flat share count, little dilution, little buyback.