Is ZS a high-quality business?

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

What is Zscaler, Inc.'s AlphaQuality grade?

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

ZS - Zscaler, Inc.

Price: -- -- | CONSENSUS: Buy DETAILS | PRICE TARGET: $270.12 DETAILS

AlphaQuality

Quantitative six-pillar business-quality grade

High-Growth Software

AlphaQuality — archetype-weighted quantitative grade

F 30.0 / 100 pillar composite

Composite Grade

Composite of six pillars weighted for high-growth software businesses. Purely quantitative — no stock price or analyst input.

⚠ 5 of the last 5 fiscal years showed negative net income — AlphaQuality will not grade above F for persistent unprofitability in a high-growth software business.

Grade overrides the 30.0 pillar composite because hard gates always win. Use the pillar breakdown below to see where the underlying numbers sit.

Profitability

Weight: 15%

D- 32.5

5yr Avg ROIC -3.2% 4/100
Operating Margin Trend +7.63 pp/yr 100/100

Capital Efficiency

Weight: 15%

F 6.0

5yr Avg ROE -10.6% 0/100
5yr Share-Count CAGR 3.3% 17/100

Growth Quality

Weight: 35%

B 72.0

5yr Revenue CAGR 41.2% 100/100
5yr EPS CAGR 0.0% 20/100
Revenue-Growth Years (5) 5/5 100/100

Cash Generation

Weight: 20%

C 51.4

5yr FCF Margin 23.5% 93/100
5yr FCF/NI Conversion 0.00x 0/100

Balance Sheet

Weight: 10%

B 69.3

Net Debt / EBITDA -15.80x 100/100
Interest Coverage (EBIT/Int) -0.92x 0/100
Altman Z-Score 4.42 97/100

Stability

Weight: 5%

A- 80.0

EPS Volatility (σ/μ) 0.00 100/100
Piotroski F-Score 3 33/100
Negative-Revenue Years (5) 0/5 100/100

4 of 5 gurus held; 2 added; 1 trimmed; 1 full exit.

Holders: 4 -1
Avg Δ position: +397.6%
New buys: 0
Full exits: 1

Dalio sold -100%
Greenblatt increased +1413%
Wood increased +259%

How this is calculated

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

Profitability (15%) — 5yr Avg ROIC, Operating Margin Trend
Capital Efficiency (15%) — 5yr Avg ROE, 5yr Share-Count CAGR
Growth Quality (35%) — 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.