Is LUV a high-quality business?

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

What is Southwest Airlines Co.'s AlphaQuality grade?

AlphaQuality assigns a letter grade (A through F) to LUV 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 LUV 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.

LUV - Southwest Airlines Co.

Price: -- -- | CONSENSUS: Hold DETAILS | PRICE TARGET: $49.89 DETAILS

AlphaQuality

Quantitative six-pillar business-quality grade

Stable Earnings Power

AlphaQuality — archetype-weighted quantitative grade

C- 47.3 / 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%

D- 27.2

5yr Avg ROIC 5.8% 39/100
Operating Margin Trend -2.19 pp/yr 0/100

Capital Efficiency

Weight: 15%

C+ 61.1

5yr Avg ROE 7.2% 46/100
5yr Share-Count CAGR -2.2% 89/100

Growth Quality

Weight: 15%

C+ 61.2

5yr Revenue CAGR 15.5% 91/100
5yr EPS CAGR -16.3% 0/100
Revenue-Growth Years (5) 5/5 100/100

Cash Generation

Weight: 15%

F 14.0

5yr FCF Margin 0.1% 25/100
5yr FCF/NI Conversion -0.93x 0/100

Balance Sheet

Weight: 20%

B 69.0

Net Debt / EBITDA 1.23x 82/100
Interest Coverage (EBIT/Int) 5.98x 69/100
Altman Z-Score 2.17 47/100

Stability

Weight: 15%

C- 50.7

EPS Volatility (σ/μ) 0.72 13/100
Piotroski F-Score 6 67/100
Negative-Revenue Years (5) 0/5 100/100

4 of 4 gurus held; 3 added; 1 trimmed.

Holders: 4
Avg Δ position: +232.7%
New buys: 0
Full exits: 0

Dalio increased +893%
Greenblatt increased +66%
Wood decreased -29%

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.