Buffett Brain · Research note
Score updated 5 Oct 2026 · analysis from 2 Jun 2026
TM· Consumer Discretionary
Toyota
Toyota is the best-run carmaker on earth, yet it still earns a thin 7.4% operating margin and a 3.3% return on capital.
Buffett fit
Weak fit
Owner
7
Durability
88
Management
30
Price
53
Score updated 5 Oct 2026 · analysis from 2 Jun 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Consumer Discretionary stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned all of Toyota, I would respect the operating discipline and the legendary production system, but I would not kid myself about the economics.
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The business will be here in twenty years, and the durability score of 88 reflects that.
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Management earns a low score of 30, and the numbers explain why. Returns on capital sit in the low single digits while the company carries debt of 1.08 times equity and net debt of 4.3 times EBITDA.
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Here is where I step off. The owner-earnings yield is a paltry 1.5%, which means at this price you are paying about 67 times the actual cash the business throws off to owners.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
6- 1Exceptional cyclical durability, with the worst earnings decline in our window only about 13% and a durability score of 88.
- 2Revenue grew at a strong 14.4% compound rate, helped by pricing and global scale.
- 3Earnings per share compounded at 11.1%, and the share count actually shrank about 1.6% per year.
- 4Interest coverage of 43 times means debt service is never in question, even with a large finance book.
Concerns
7- 1Valuation is the deal-breaker: the owner-earnings yield is just 1.5%, so you are paying roughly 67 times the cash owners actually receive, and EV/ of 17.6 is rich for this business.
- 2Return on capital is just 3.3% this year and only 5.6% over five years, barely above the cost of capital.
- 3The of 7.4% is thin and structural to car manufacturing, not a fixable problem.
- 4 was only 14.5% of net income, so reported earnings badly overstate the cash owners get.
Price history
$181+5.5%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Toyota sells roughly ten million cars and trucks a year and runs a large captive finance arm that lends buyers the money to drive them off the lot. The is a modest 16.7% and the only 7.4%, which is what auto manufacturing pays no matter how well you do it. Revenue did grow at a 14.4% clip, but a chunk of that is yen weakness and price, not a structurally better business.
How this analysis has moved
The call has held across 2 reviews.
Sep 27, 2026 → Oct 4, 2026
What other investors would say
The same company, judged by three other documented playbooks.
Keep researching
Similar companies in Consumer Discretionary
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