Is WSO a high-quality business?

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

What is Watsco, Inc.'s AlphaQuality grade?

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

WSO - Watsco, Inc.

Price: -- -- | CONSENSUS: Hold DETAILS | PRICE TARGET: $399.80 DETAILS

AlphaQuality

Quantitative six-pillar business-quality grade

Platform & Compounding FCF

AlphaQuality — archetype-weighted quantitative grade

B 70.2 / 100 composite

Composite Grade

Composite of six pillars weighted for platform & compounding fcf businesses. Purely quantitative — no stock price or analyst input.

Profitability

Weight: 25%

B 73.9

5yr Avg ROIC 18.1% 87/100
Operating Margin Trend -0.21 pp/yr 43/100

Capital Efficiency

Weight: 15%

B 70.3

5yr Avg ROE 18.6% 89/100
5yr Share-Count CAGR 1.7% 36/100

Growth Quality

Weight: 25%

C 53.0

5yr Revenue CAGR 3.6% 50/100
5yr EPS CAGR 3.2% 42/100
Revenue-Growth Years (5) 4/5 80/100

Cash Generation

Weight: 20%

B+ 77.6

5yr FCF Margin 7.4% 60/100
5yr FCF/NI Conversion 1.02x 100/100

Balance Sheet

Weight: 10%

A+ 98.5

Net Debt / EBITDA -0.33x 97/100
Interest Coverage (EBIT/Int) 30.00x 100/100
Altman Z-Score 9.57 100/100

Stability

Weight: 5%

C 53.3

EPS Volatility (σ/μ) 0.45 37/100
Piotroski F-Score 5 56/100
Negative-Revenue Years (5) 1/5 80/100

2 of 3 gurus held; 1 added; 1 trimmed; 1 full exit.

Holders: 2 -1
Avg Δ position: +43.3%
New buys: 0
Full exits: 1

Cooperman sold -100%
Greenblatt increased +137%
Wood decreased -50%

How this is calculated

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

Profitability (25%) — 5yr Avg ROIC, Operating Margin Trend
Capital Efficiency (15%) — 5yr Avg ROE, 5yr Share-Count CAGR
Growth Quality (25%) — 5yr Revenue CAGR, 5yr EPS CAGR, Revenue-Growth Years (5)
Cash Generation (20%) — 5yr FCF Margin, 5yr FCF/NI Conversion
Balance Sheet (10%) — Net Debt / EBITDA, Interest Coverage (EBIT/Int), Altman Z-Score
Stability (5%) — 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.