Reported profit isn't what owners can take out. Buffett's owner earnings is closer, and this works it out from real figures.
Example inputs, not real data
Owner earnings
$1.1B
Growth capex is the plant a business had to add to serve higher sales. What's left of capex is roughly what it costs to stand still, which is what owners must keep spending.
In the appendix to his 1986 letter, Buffett described owner earnings as reported earnings, plus depreciation, depletion and amortisation and other non-cash charges, less the average annual capital spending the business needs to keep its competitive position and unit volume. He added that the last part has to be estimated, which is why owner earnings is a judgement rather than a line in the accounts.
Companies don't report how much of their capital spending simply keeps the lights on. A widely used estimate, from Columbia professor Bruce Greenwald, works out how much plant a business typically needs for each dollar of sales, multiplies that by this year's sales growth, and treats that much capex as investment for growth. The rest is maintenance. It's imperfect for businesses whose sales fell or whose assets are mostly intangible, but it beats subtracting all capex or none.
Two companies with the same profit can be worth very different amounts. One that must reinvest most of its earnings just to stand still leaves owners little. One that grows with little extra capital is the kind of business Buffett prized. Compare owner earnings with net income over several years: if they diverge, find out why.