Free tool · No signup · Live ticker data
Owner Earnings Calculator
Calculate Warren Buffett's owner earnings formula for any public company. Auto-fills net income, D&A, and CapEx from Yahoo Finance. Compare owner earnings yield to FCF yield and reported EPS to see what the business truly earns for its owners.
Inputs
From cash flow statement (Yahoo Finance). Used to estimate maintenance CapEx below.
Buffett's key insight: maintenance CapEx ≠ total CapEx. 70% is a common shortcut. Growth companies may be 50–60%; mature businesses 80–100%.
Results
Load a ticker or enter values to calculate owner earnings.
What Are Owner Earnings?
Warren Buffett introduced owner earnings in his 1986 Berkshire Hathaway shareholder letter as a more accurate measure of a business's true earning power than reported net income or even free cash flow. The formula:
Owner Earnings = Net Income
+ Depreciation & Amortization
− Maintenance CapEx
Reported net income adds back depreciation as a non-cash charge, but depreciation approximates something real: the physical wearing-out of assets. The problem is that accounting depreciation rarely matches the actual cash cost of maintaining the business's competitive position. Owner earnings fixes this by using actual maintenance capital expenditures instead of the depreciation estimate.
Why Reported Earnings Can Mislead
For capital-intensive businesses — railroads, manufacturers, retailers — annual CapEx to replace aging equipment often exceeds depreciation because replacement costs rise with inflation. Using depreciation overstates what those businesses actually earn. For capital-light businesses — software companies, professional services — the reverse is true: maintenance CapEx is minimal, so adding back full depreciation may understate earning power. Owner earnings adjusts for both cases.
Owner Earnings vs Free Cash Flow
Free cash flow = operating cash flow − all CapEx. Owner earnings uses only maintenance CapEx. For a growing business that is investing heavily in expansion, this is a meaningful difference: FCF can look very low (or negative) while the underlying business is highly profitable on a maintenance basis. Owner earnings shows what the business earns after sustaining its competitive position — independent of how aggressively management is reinvesting for growth. See the full comparison in the free cash flow calculator.
How to Use This Calculator
Load a ticker
Enter any US-listed ticker and click Load. The calculator auto-fills net income, D&A, and total CapEx from Yahoo Finance using the most recent annual figures. All inputs are editable — override any value with your own estimate.
Review the maintenance CapEx default
The calculator defaults maintenance CapEx to 70% of total CapEx. This is a reasonable starting point for most businesses. D&A is a useful cross-check: for stable businesses, maintenance CapEx should roughly equal D&A.
Adjust for the specific business
Growth companies reinvesting heavily: try 50–60%. Mature businesses with limited expansion: 80–100%. Capital-light businesses (software, services): maintenance CapEx may be well below total CapEx. Use your judgment — this is the step that requires analyst work.
Read the comparison panel
Compare owner earnings yield to FCF yield and earnings yield. A large gap between owner earnings and FCF often signals heavy growth CapEx. A large gap versus EPS often signals aggressive accounting accruals. Both warrant scrutiny before relying on any single metric.
Owner Earnings in Practice
The 70% Rule of Thumb
For the average US publicly traded company, maintenance CapEx runs around 60–75% of total CapEx. The remaining 25–40% represents discretionary growth spending. Buffett's original framing emphasized that this split is inherently imprecise — it requires judgment about which spending sustains vs. expands the business.
A more precise method: use D&A as a proxy for maintenance CapEx. Over long periods in a stable business, accumulated maintenance CapEx should roughly equal accumulated depreciation. Large divergences warrant explanation.
When Owner Earnings Exceed FCF
If owner earnings is substantially higher than free cash flow, the company is investing heavily in growth — and that gap represents capital being allocated to expansion, not maintenance. This is not a red flag; it is a characteristic of growth businesses. Amazon, Meta, and many capital-intensive growers show owner earnings that dwarf FCF during heavy investment phases.
The risk: the growth spending must eventually generate returns that justify the premium over maintenance-level earnings. If it does not, owner earnings is overstated as a guide to intrinsic value.
When Owner Earnings Lag EPS
If owner earnings is significantly below reported EPS, one of two things is happening: (1) maintenance CapEx is materially higher than accounting depreciation — common in capital-intensive industries where inflation has raised replacement costs above original cost. (2) The business is using aggressive accruals to boost reported income without corresponding cash.
This is the signal Buffett was pointing at in 1986: the earnings quality score measures this gap directly.
Using Owner Earnings in a DCF
Owner earnings is an excellent base for a DCF model. Instead of using reported net income (which includes non-cash items and ignores real capital costs) or FCF (which deducts all CapEx), owner earnings reflects the actual cash available to grow the business beyond its maintenance level.
To build a DCF from owner earnings: project owner earnings forward using a sustainable growth rate, then discount at your required return. The DCF calculator uses FCF as the base — plug your maintenance-adjusted figure there to see the intrinsic value.
Frequently Asked Questions
What are owner earnings?
Owner earnings is Warren Buffett's measure of a business's true cash earning power: Net Income + D&A − Maintenance CapEx. It corrects for the difference between accounting depreciation and the actual cash cost of sustaining the business's competitive position.
How is owner earnings different from free cash flow?
FCF deducts all CapEx. Owner earnings deducts only maintenance CapEx. For growing businesses that reinvest heavily, owner earnings will exceed FCF. For mature businesses spending only on maintenance, they should be similar.
What is maintenance CapEx?
The capital spending required to maintain the company's existing business — not to grow it. Companies do not report this separately. The 70% rule of thumb (70% of total CapEx = maintenance) is a starting point; use D&A as a cross-check for stable businesses.
What is owner earnings yield?
Owner earnings ÷ market cap, expressed as a percentage. It measures what the business earns for owners relative to its price. Compare to the 10-year Treasury yield as a baseline: the premium over risk-free rates is the equity risk compensation you're receiving.
Why did Buffett create owner earnings?
To fix what he saw as a flaw in GAAP earnings: depreciation is an accounting estimate that often diverges from actual capital requirements. For capital-intensive businesses, maintenance CapEx exceeds depreciation due to inflation. Owner earnings uses real cash outflows instead.
When does owner earnings fail?
For financial companies (banks, insurers), where capital allocation is regulatory-driven rather than CapEx-driven. Also for early-stage businesses with no stable competitive position, and companies mid-restructuring where current CapEx doesn't reflect normal run-rate spending.