BAX, Baxter International Inc
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- A capital-intensive business, run on heavy physical assets that have to be kept working.
- Situation
- Unprofitable growth. no operating profit yet, judge it on revenue growth, gross-margin trajectory, cash burn and runway, never on an earnings multiple. Distress / turnaround. thin interest coverage or cash-burning operations against real debt, the first questions are liquidity and the maturity wall, not growth. Cyclical. margins collapse repeatedly across the cycle, a single year misleads; look at normalized, through-cycle earnings and the balance sheet at the trough.
- What moves the needle
- How hard the assets work, and what the inputs cost. What decides it: utilization, how much of the capex merely keeps the assets running, and what a downturn does to a heavy fixed-cost base.
- Is it a good business?
- Return on capital has rarely cleared the cost of capital (median 5%, above 15% in 2 of 10 years). Owner earnings agree: roughly 10% of revenue reaches owners as cash, consistently. The cycle and the balance sheet decide this one, so weigh the worst year against the median, and read the 10-K.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
Where the money comes from
read the 10-K →46% of revenue comes from outside the United States.
- United States54%$6.1B
- Rest of world33%$3.7B
- Emerging markets12%$1.4B
From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.
The record, 2016–2025
realized figures from each filing, no estimates| 2016’16 | 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $10.2B | $10.6B | $11.1B | $11.4B | $11.7B | $12.1B | $10.1B | $10.4B | $10.6B | $11.2B | $11.3B |
| Operating marginOp. mgn | 7.3% | 12.2% | 14.3% | 15.6% | 13.8% | 11.1% | −28.3% | 6.8% | 0.1% | −2.7% | −2.7% |
| Net incomeNet inc. | $5.0B | $602M | $1.5B | $1.0B | $1.1B | $1.3B | ($2.4B) | $2.7B | ($649M) | ($957M) | ($1.1B) |
| EPS (diluted)EPS | $9.01 | $1.08 | $2.83 | $1.93 | $2.13 | $2.53 | $-4.83 | $5.23 | $-1.27 | $-1.87 | $-2.13 |
| Owner earningsOwner earn. | $935M | $1.1B | $1.4B | $1.4B | $1.2B | $1.5B | $834M | $1.3B | $573M | $332M | $738M |
| ROICROIC | 9% | 8% | 16% | 18% | 12% | 5% | -11% | 4% | 0% | -2% | -2% |
| CapexCapex | $719M | $616M | $659M | $696M | $709M | $691M | $377M | $432M | $446M | $513M | $513M |
| Capex / revenueCapex/rev | 7.1% | 5.8% | 5.9% | 6.1% | 6.1% | 5.7% | 3.7% | 4.2% | 4.2% | 4.6% | 4.5% |
| Capex vs depreciationCapex/dep | 0.90× | 0.82× | 0.85× | 0.88× | 0.86× | 0.80× | 0.35× | 0.44× | 0.45× | 0.52× | 0.53× |
| Total debtDebt | $2.8B | $3.5B | $3.5B | $5.1B | $6.2B | $17.8B | $16.7B | $13.9B | $13.2B | $9.5B | $9.5B |
| Cash & investmentsCash+inv | $2.8B | $3.4B | $2.9B | $3.3B | $3.7B | $3.0B | $1.6B | $3.1B | $1.8B | $2.0B | $3.2B |
| Net debt / (cash)Net debt | ($19M) | $118M | $601M | $1.8B | $2.5B | $14.8B | $15.1B | $10.8B | $11.4B | $7.5B | $6.2B |
Owner’s Scorecard
Will it survive?
- Can it pay its interest? -1.1×Does not cover its interestOperating income ($308M) ÷ interest expense $290M
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.
- Debt against an operating lossTotal debt $9.5B · operating income ($308M)
There's debt but no operating profit to measure it against, understand that combination before anything else about the company.
- Debt, net of cash $2.4BNet debtCash $2.0B + ST investments $5.1B − debt $9.5B
Netting $7.1B of cash and short-term investments against $9.5B of debt leaves $2.4B owed. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- Capital-hungryDSO 60 + DIO 104 − DPO 46 days
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?
- Below averageNOPAT ($243M) ÷ invested capital $13.6B (debt + equity − cash)
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; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- ThinOwner Earnings $332M = operating cash $845M − capex $513M
What an owner could take out without starving the business. That's 3% of revenue. Treating stock comp as the real expense it is (less $117M of SBC) leaves $215M. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Loss, but cash-generativeNet income ($957M) · cash from operations $845M
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?
- Returns most of itDividends + buybacks $348M ÷ Owner Earnings $332M
Of $332M Owner Earnings, $348M (105%) went back to shareholders, $348M dividends, $0 buybacks. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? 0.52×HarvestingCapex $513M ÷ depreciation $981M
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.
Durability & moat, 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 7 of 10
Lost money in 3 year(s), look at what happened there before trusting the average.
- Return on capital ≥ 15% 2 of 10 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 7% (FY2016) → −3% (FY2025)
Margins slipped over the record, competition or costs are biting in.
- Reinvestment, incremental ROIC −10%
Reinvested capital earned a negative return, the business spent money to shrink its own economics.
- Owner earnings growth −9%/yr
Free cash to owners shrank about 9% a year over the record.
- Worst year 2022 · −28.3% op. margin
Operations went underwater in 2022, understand why before trusting the good years.
- Share count −0.8%/yr
The share count is shrinking, buybacks are quietly growing your slice of the business.
- Dividend record rising
Paid and raised the dividend across the record, the continuity Graham prized.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
How the cash was used, 2016–2025
Over the record, the business generated $16.4B of operating cash, and how management split it is, as Buffett insists, the job that matters most. Here it reads as a mature cash machine, most of what it earns goes straight back to owners.
- Reinvested$5.9B · 36%
- Dividends$4.5B · 27%
- Buybacks$5.7B · 35%
- Retained (debt / cash)$330M · 2%
It reinvested $5.9B (36%) back into the business and returned $10.2B (62%) to owners, $4.5B in dividends, $5.7B in buybacks. Total debt rose $6.7B across the span.
Buybacks are gross of stock issued to employees; net of that, the real return to owners is lower (see Management & pay). And the mix alone doesn't grade management, what matters is the return earned on the dollars reinvested (see incremental ROIC in the durability report).
Management & pay
Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- Stock-based compensation$117M
The slice of the business handed to employees in shares this year, 1% of revenue. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. And note the trap, the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Graham’s defensive-investor test
3 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $11.2B
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 PassCurrent ratio ≥ 2× · 2.31×
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 MissDebt ≤ working capital · $9.5B vs $3.9B WC
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 MissA profit every year (10-yr record) · 3 loss years
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record PassUninterrupted dividends · paid every year (10)
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 MissEarnings +33% over the record · −85%
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
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $-1.87/share and book value $11.95/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.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFA price is the one input we don't pull, you bring it. Type today's close (read it off any broker or quote site) and see the owner-earnings growth you'd have to believe to justify it, set beside what Baxter International Inc has actually delivered. Nothing is stored; the number stays in your browser.
Enter a price above to run it.
Graham capped the multiple at 15×; Buffett and Munger let that rule go, a wonderful business can deserve 50× if the thesis holds. Read it as the bargain-hunter's floor, not a ceiling on good sense.
The discount rate is your interest rate, what a dollar years from now is worth today, anchored to the long-term Treasury yield (~4–5% today, plus whatever premium you want for risk). Drag it toward the risk-free rate and watch how much growth the price suddenly “needs”: interest rates are gravity on valuations.
Owner earnings $738M on 515M diluted shares; net debt $6.2B. This is a lens, not a price target, it says what you'd have to believe, not what the company is worth, and it runs on one year of (noisy) owner earnings at assumptions you can see and change.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Pricing power & competitionMD&A
Whether the company sets its price or takes it. Durable pricing power is the surest mark of a moat; price competition is the surest mark there isn't one.
“Compliance with these and similar regulations could result in pricing pressure or negatively impact the demand for our products.”
From the recordOperating margin−2.7% now (TTM), off a 15.6% peak (FY2019) - Supplier & input dependenceMD&A
A choke point upstream. A sole or limited supplier can dictate terms, and a single shortage can stop the line.
“Sole source supplier relationships may limit our ability to respond to these tariffs with alternative or lower cost raw materials or component parts.”
From the recordGross-margin cushion (TTM)30% - Concentrated dependenceBusiness
What the whole business leans on, a product, a platform, a partner. Concentration cuts both ways, and the filing is where management has to admit it.
“A significant portion of our revenues are generated outside of the United States and thoughtful optimization of the markets in which we operate remains a key component of our strategy.”
From the recordOwner-earnings margin at stake (TTM)7% - Debt terms & refinancingRisk Factors
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“The indenture governing the Notes contains various covenants, which include limitations on our ability and the ability of certain of our subsidiaries to create, incur, assume or guarantee secured debt and our ability to merge or consolidate with any other entity or sell, transfer or lease all or sub…”
From the recordBalance sheet (TTM)$2.4B net debt · operating profit doesn't cover interest - Litigation & contingenciesMD&A
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“If we are unable to protect or enforce our patents or other proprietary rights, or if we become subject to claims or litigation alleging infringement of the patents or other proprietary rights of others, our competitiveness and business prospects may be materially damaged.”
A judgment, not a number, weigh it against the filing yourself. - Regulation & policyBusiness
Rules that can rewrite the economics, tariffs, antitrust, data, export controls.
“As of December 31, 2025, we repaid $3.81 billion of legacy indebtedness in 2025 (which repayment does not include $2.00 billion of indebtedness repaid with proceeds from a new notes offering) primarily with the net after-tax proceeds from the sale of our Kidney Care business.”
A judgment, not a number, weigh it against the filing yourself.
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “Additionally, as local, state, regional, federal, and global legal and regulatory requirements relating to climate change and other sustainability topics continue to evolve, they may create inconsistent or conflicting obligations that have led to, and could continue to lead to, increased compliance …”
- “We are also subject to similar risks associated with the continued support for Vantive's information technology systems, through the transitional services period in the Vantive TSA, which could lead to breaches, disruption, interruptions and impact our financial condition or lead to reputational har…”
- “Additionally, continued global macroeconomic uncertainty, including in trade policies and practices, elevated tariffs and operational and policy changes in the governments of the U.S. and other countries and other geopolitical events or conflicts, could contribute to further market volatility, deter…”
- “We risk experiencing negative stockholder reaction, as well as damage to our brand and reputation and other potential costs, if we fail to (or are perceived to fail to) maintain and satisfy our goals, commitments, and other sustainability and corporate responsibility efforts, if we fail to accuratel…”
- “(in millions) Other holdings Balance at December 31, 2023 $ 155 Unrealized gains (losses) ( 24 ) Sales ( 7 ) Purchases 3 Balance at December 31, 2024 127 Unrealized gains (losses) 10 Sales ( 7 ) Purchases 2 Balance at December 31, 2025 $ 132 The assets and liabilities of our pension plans are valued…”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Medical devices
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| BSXBoston Scientific Corp | $20.1B | 69% | 18.0% | 9% | 18% |
| BAXBaxter International Inc | $11.2B | 30% | -2.7% | -2% | 3% |
| ISRGIntuitive Surgical, Inc. | $10.1B | 66% | 29.3% | 18% | 25% |
| ZBHZimmer Biomet Holdings, Inc. | $8.2B | 70% | 13.3% | 5% | 18% |
| EWEdwards Lifesciences Corporation | $6.1B | 78% | 20.8% | 13% | 22% |
| RMDResmed Inc. | $5.1B | 59% | 32.7% | 26% | 32% |
| DXCMDexcom, Inc. | $4.7B | 60% | 19.6% | 38% | 23% |
| PODDInsulet Corporation | $2.7B | 72% | 17.5% | 17% | 14% |