ARDX, Ardelyx Inc.

Will it survive?

• Can it pay its interest? -2.0×
  Does not cover its interest
  Operating income ($41M) ÷ interest expense $20M
  What this means

  A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.

• How heavy is the debt, net of cash? $135M
  Net debt against an operating loss
  Cash $68M − debt $203M
  What this means

  Netting $68M of cash and short-term investments against $203M of debt leaves $135M owed, with no operating profit this year to measure it against — understand that combination before anything else about the company. 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? 1023d
  Long (60+ days)
  DSO 64 + DIO 1137 − DPO 178 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 -82%
  Below average through the cycle
  10-yr median, range -1224%–-9%; -11% latest = NOPAT ($32M) ÷ invested capital $302M
  Industry peers: median -3%
  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 -11% 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 -103%
  Consumes cash through the cycle
  6-yr median margin, range -302%–-11%; latest ($44M) = operating cash ($42M) − maintenance capex $1M
  Industry peers: median -45%
  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 -11% of revenue this year, a -103% median across 6 years. Treating stock comp as the real expense it is (less $49M of SBC) leaves ($93M).

• Are earnings backed by cash? ($42M)
  Loss, and burning cash
  Net income ($62M) · cash from operations ($42M)
  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 not.

How is the cash used?

• Where do the earnings go? —
  Not enough data
  What this means

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

• Investing or harvesting? 0.49×
  Harvesting
  Capex $1M ÷ depreciation & amortization as filed $3M
  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? 12.0%
  Stock pay, share count unread
  Stock compensation $49M (fiscal 2025), 12.0% of revenue · no repurchases · the share count is not comparable across these years (a split or a first listing sits in the record), so the drift is withheld
  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 4 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 Miss
  Revenue ≥ $2B · $407M
  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× · 4.31×
  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 · $203M vs $294M 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) · 10 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 —
  Earnings +33% over the record · —
  What this means

  Earnings were negative early in the record, a growth rate isn't meaningful.

• 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 $-0.22/share (latest year $-0.25), the averaged base the calculator's gate runs on, and book value is $0.67/share. 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, 2015–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 0 of 10
  What this means

  Lost money in 10 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 0 of 8 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 −1255% → −23% (3-yr avg ends)

  In the filing’s words The filing ties gains to its own pricing, but names price competition too — pricing power that is real yet contested, not unopposed. The margin shows who is winning.

  What this means

  Through the cycle the operating margin widened — about −1255% early to −23% lately, median −155% — pricing power intact or improving.

• Reinvestment, incremental ROIC 8%
  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 2018 · −3488.6% op. margin
  What this means

  Operations went underwater in 2018, understand why before trusting the good years.