TLN, Talen Energy Corporation

Will it survive?

• Can it pay its interest? -0.3×
  Does not cover its interest
  Operating income ($90M) ÷ interest expense $302M
  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? $6.1B
  Net debt against an operating loss
  Cash $689M − debt $6.8B
  What this means

  Netting $689M of cash and short-term investments against $6.8B of debt leaves $6.1B 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? —
  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 2%
  Below average through the cycle
  4-yr median, range -1%–5%; -1% latest = NOPAT ($71M) ÷ invested capital $7.2B
  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 4 years (it ran -1% 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 4%
  Thin through the cycle
  6-yr median margin, range -4%–23%; latest $606M = operating cash $704M − maintenance capex $98M
  Industry peers: median 11%
  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 23% of revenue this year, a 4% median across 6 years. Treating stock comp as the real expense it is (less $526M of SBC) leaves $80M.

• Are earnings backed by cash? $704M
  Loss, but cash-generative
  Net income ($219M) · cash from operations $704M
  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? 17%
  Reinvests most of it
  Dividends + buybacks $103M ÷ Owner Earnings $606M — this fiscal year
  What this means

  Of $606M Owner Earnings, $103M (17%) went back to shareholders, $0 dividends, $103M buybacks. But the buybacks barely exceed stock issued to employees ($526M SBC), net of dilution, little was truly returned. 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. This year's proportion is 17%; across the record (2013–2025) it is 224%, the capital-allocation section below.

• Investing or harvesting? 0.35×
  Harvesting
  Capex $98M ÷ depreciation & amortization as filed $279M
  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? 20.4%
  Stock pay, share count unread
  Stock compensation $526M (fiscal 2025), 20.4% of revenue · repurchases $103M · 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 · 1 of 3 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 Pass
  Revenue ≥ $2B · $2.6B
  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 —
  Current ratio ≥ 2× (waived for utilities) · exempt
  What this means

  Graham exempted public utilities from this test: their working capital “takes care of itself” through the continuous bond-and-share financing of growth, so a thin current ratio is the industry's structure, not a warning. His substitute test — debt no more than twice book equity — is the next line.

• Conservative debt Miss
  Debt ≤ 2× equity (Graham's utility test) · $6.8B vs $1.1B equity
  What this means

  Graham's own substitution for public utilities: debt not exceeding twice the stock equity at book value, in place of the working-capital tests an industrial faces. A utility finances its plant with bonds by design; the question is whether the borrowing stays inside the equity behind it.

• Earnings stability Miss
  A profit every year (6-yr record) · 4 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 $-3.55/share (latest year $-4.57), the averaged base the calculator's gate runs on, and book value is $22.81/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, 2013–2025

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

• Profitable years 2 of 6
  What this means

  Lost money in 4 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 0 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 0% → 5% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 0% early to 5% lately, median −1% — pricing power intact or improving.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Worst year 2013 · −6.5% op. margin
  What this means

  Operations went underwater in 2013, understand why before trusting the good years.