Is DEO a high-quality business?

AlphaMadera's AlphaQuality grade scores Diageo plc on six pillars — profitability, capital efficiency, balance-sheet strength, growth durability, cash generation, and shareholder yield. The composite letter grade reflects how DEO compares to a Buffett-style quality bar.

What is Diageo plc's AlphaQuality grade?

AlphaQuality assigns a letter grade (A through F) to DEO based on a six-pillar quantitative model. The live page shows the composite grade plus each pillar's individual score with the underlying metrics.

What makes DEO a quality stock?

AlphaQuality looks at return on capital, free-cash-flow margins, debt-to-equity, revenue stability, dividend and buyback policy, and operating-margin trend. Stocks scoring well across all six pillars earn higher grades — the methodology favors compounders over cyclicals.

DEO - Diageo plc

Price: -- -- | CONSENSUS: Buy DETAILS | PRICE TARGET: $99.00 DETAILS

AlphaQuality

Quantitative six-pillar business-quality grade

Stable Earnings Power

AlphaQuality — archetype-weighted quantitative grade

B- 65.6 / 100 composite

Composite Grade

Composite of six pillars weighted for stable earnings power businesses. Purely quantitative — no stock price or analyst input.

Profitability

Weight: 20%

C- 46.6

5yr Avg ROIC 10.4% 62/100
Operating Margin Trend -1.49 pp/yr 10/100

Capital Efficiency

Weight: 15%

A+ 93.7

5yr Avg ROE 28.7% 100/100
5yr Share-Count CAGR -1.3% 82/100

Growth Quality

Weight: 15%

C 56.9

5yr Revenue CAGR 12.3% 86/100
5yr EPS CAGR -0.9% 18/100
Revenue-Growth Years (5) 3/5 60/100

Cash Generation

Weight: 15%

A+ 93.7

5yr FCF Margin 19.5% 89/100
5yr FCF/NI Conversion 1.05x 99/100

Balance Sheet

Weight: 20%

C 51.1

Net Debt / EBITDA 3.42x 42/100
Interest Coverage (EBIT/Int) 4.48x 60/100
Altman Z-Score 2.53 58/100

Stability

Weight: 15%

B- 62.3

EPS Volatility (σ/μ) 0.27 61/100
Piotroski F-Score 6 67/100
Negative-Revenue Years (5) 2/5 60/100

2 of 3 gurus held; 1 new buy; 1 added; 2 full exits.

Holders: 2 -1
Avg Δ position: +46.7%
New buys: 1
Full exits: 2

Buffett sold -100%
Dalio sold -100%
Wood new

How this is calculated

AlphaQuality grades six pillars from 0-100 and weights each by archetype:

Profitability (20%) — 5yr Avg ROIC, Operating Margin Trend
Capital Efficiency (15%) — 5yr Avg ROE, 5yr Share-Count CAGR
Growth Quality (15%) — 5yr Revenue CAGR, 5yr EPS CAGR, Revenue-Growth Years (5)
Cash Generation (15%) — 5yr FCF Margin, 5yr FCF/NI Conversion
Balance Sheet (20%) — Net Debt / EBITDA, Interest Coverage (EBIT/Int), Altman Z-Score
Stability (15%) — EPS Volatility (σ/μ), Piotroski F-Score, Negative-Revenue Years (5)

We deliberately ignore stock price, analyst targets, and consensus ratings so the grade is suitable for backtesting forward returns. A minimum of 5 fiscal years of audited statements is required; distressed and highly leveraged infrastructure businesses are declared ungradable rather than forced into a numeric score.