WES, Western Midstream Partners LP Common

Will it survive?

• Can it pay its interest? 4.1×
  Adequate
  Operating income $1.6B ÷ interest expense $390M
  What this means

  Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.

• How heavy is the debt, net of cash? $7.8B · 4.9× operating profit
  Heavy net debt
  Cash $819M − debt $8.6B
  What this means

  Netting $819M of cash and short-term investments against $8.6B of debt leaves $7.8B owed, about 4.9× a year's operating profit (5.4× 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? —
  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 13%
  Solid through the cycle
  9-yr median, range 9%–19%; 13% latest = NOPAT $1.6B ÷ invested capital $11.8B
  Industry peers: median 5%
  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 9 years (it ran 13% 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 38%
  High through the cycle
  10-yr median margin, range 30%–54%; latest $1.5B = operating cash $2.2B − maintenance capex $728M
  Industry peers: median 17%
  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 39% of revenue this year, a 38% median across 10 years. Treating stock comp as the real expense it is (less $51M of SBC) leaves $1.4B.

• Are earnings backed by cash? 1.88×
  Cash-backed
  Cash from ops $2.2B ÷ net income $1.2B
  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? 96%
  Returns most of it
  Dividends + buybacks $1.4B ÷ Owner Earnings $1.5B — this fiscal year
  What this means

  Of $1.5B Owner Earnings, $1.4B (96%) went back to shareholders, $1.4B dividends, $0 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. This year's proportion is 96%; across the record (2016–2025) it is 80%, the capital-allocation section below.

• Investing or harvesting? 1.02×
  Maintaining
  Capex $728M ÷ depreciation & amortization as filed $711M
  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? 1.3%
  The count is edging down
  Stock compensation $51M (fiscal 2025), 1.3% of revenue · no repurchases · diluted shares -2.1% 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 · 4 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 Pass
  Revenue ≥ $2B · $3.8B
  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 Near
  Debt ≤ 2× equity (Graham's utility test) · $8.6B vs $4.0B 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 Pass
  A profit every year (10-yr record) · no losses
  What this means

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

• Dividend record Pass
  Uninterrupted dividends · paid every year (10)
  What this means

  An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.

• Earnings growth Pass
  Earnings +33% over the record · +163%
  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 $3.05/share (latest year $2.86), the averaged base the calculator's gate runs on, and book value is $9.73/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, 2016–2025

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% 4 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 36% → 47% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 36% early to 47% lately, median 42% — pricing power intact or improving.

• Reinvestment, incremental ROIC 16%
  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 +9%/yr
  What this means

  Owner earnings grew about 9% a year over the record.

• Worst year 2017 · 33.0% op. margin
  What this means

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

• Share count −0.8%/yr
  What this means

  The share count is shrinking, buybacks are quietly growing your slice of the business.

• Dividend record rising
  What this means

  Paid and raised the dividend across the record, the continuity Graham prized.