What percentage of revenue must be reinvested in capital assets. Below 8% is capital-light and attractive. Buffett prefers businesses that don't require large ongoing capital outlays to maintain their competitive position.
Formula
Description
Shows what percentage of revenue must be reinvested in capital assets just to maintain and grow the business. Low capex intensity means more revenue flows through to free cash flow. Warren Buffett prefers businesses that do not require large ongoing capital outlays.
Interpretation
Below 8% is capital-light and attractive. Above 15% suggests a capital-heavy business that must reinvest heavily. Compare to depreciation: capex consistently below depreciation may mean the company is underinvesting.
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