By Maksym Lytvynov, Founder of AlphaStocks | Last updated: 2026-09-23
How Sector Calibration Works
A scoring system that applies identical metrics to a software company and a bank is fundamentally broken. Banks run on leverage by design — flagging them for “high debt” is like flagging an airline for owning planes. REITs report depreciation that makes their earnings look artificially low. Utilities have regulated returns. AlphaStocks handles this with seven sector profiles — not by bending each model's thresholds, but by applying a model only where its source says it fits.
Why One-Size-Fits-All Scoring Fails
Most of the classic models were written for industrial companies. Piotroski's F-Score compares current ratios and gross margins; a bank reports neither. Greenblatt's return on capital divides by working capital and fixed assets; for a bank the balance sheet is the business, and Greenblatt excluded financial and utility stocks himself. Forcing such a model onto a bank produces a number that looks precise and means nothing.
So a model that does not fit a profile is reported as not applicable: it is left out of that company's axis — never scored as zero, never as neutral, and never replaced by an invented checklist. Where the sources themselves adapt (Graham's utility debt test, Buffett's 1990 letter on banks), the model uses that adaptation and names it.
Seven Sector Profiles
AlphaStocks classifies every stock in its 1,500-plus stock universe into one of seven profiles. Most companies use the General profile. The profile sets the axis weights:
| Profile | Quality | Value | Momentum | Timing |
|---|---|---|---|---|
| General | 40% | 10% | 35% | 15% |
| Bank | 45% | 10% | 30% | 15% |
| Insurer | 45% | 10% | 30% | 15% |
| Asset manager | 45% | 10% | 30% | 15% |
| Holding company | 45% | 10% | 30% | 15% |
| Utility | 40% | 15% | 30% | 15% |
| REIT | 35% | 15% | 35% | 15% |
Inside each axis, the models that apply are averaged and re-weighted among themselves.
What Each Profile Changes
| Profile | Not applicable | Fair value method |
|---|---|---|
| General | — | Two-stage owner-earnings DCF (Damodaran industry cost of equity) |
| Bank | Piotroski, Lynch, Greenblatt | Justified P/B = (ROE − g)/(COE − g) × book value |
| Insurer | Piotroski, Lynch, Greenblatt | Justified P/B = (ROE − g)/(COE − g) × book value |
| Asset manager | Piotroski, Greenblatt | Justified P/E = payout × (1 + g)/(COE − g) on normalized EPS |
| Holding company | Greenblatt | Justified P/B = (ROE − g)/(COE − g) × book value |
| Utility | Greenblatt | Justified P/E = payout × (1 + g)/(COE − g) on normalized EPS |
| REIT | Greenblatt | FFO × Nareit property-group P/FFO |
Bank Profile
Bank: rated by Buffett, Graham; not applicable: Piotroski, Lynch, Greenblatt. Fair value: Justified P/B = (ROE − g)/(COE − g) × book value. Weights: Quality 45%, Value 10%, Momentum 30%, Timing 15%.
Buffett's bank tests come from his 1990 letter on Wells Fargo: return on assets and assets against equity replace the debt test. Graham set no working-capital test for financial enterprises, so banks are judged on his other six criteria. The fair value is a justified price-to-book from Damodaran's work on valuing financial firms: equity valued from book value and the return it earns.
Explore: Financials sector stocks
REIT Profile
REIT: rated by Piotroski, Buffett, Graham, Lynch; not applicable: Greenblatt. Fair value: FFO × Nareit property-group P/FFO. Weights: Quality 35%, Value 15%, Momentum 35%, Timing 15%.
The fair value is built on FFO (net income plus depreciation and amortization) times the median price-to-FFO of the REIT's Nareit property group. The scoring models themselves use reported figures as their sources define them; Piotroski rates only REITs with a classified balance sheet.
Explore: Real Estate sector stocks
Utility Profile
Utility: rated by Piotroski, Buffett, Graham, Lynch; not applicable: Greenblatt. Fair value: Justified P/E = payout × (1 + g)/(COE − g) on normalized EPS. Weights: Quality 40%, Value 15%, Momentum 30%, Timing 15%.
Graham gave public utilities their own financial-condition test — debt against book equity instead of working capital — and the model uses it. The fair value is a justified P/E on the utility's return on equity.
Explore: Utilities sector stocks
Insurer, Holding, Asset Manager Profiles
Insurer: rated by Buffett, Graham; not applicable: Piotroski, Lynch, Greenblatt. Fair value: Justified P/B = (ROE − g)/(COE − g) × book value. Weights: Quality 45%, Value 10%, Momentum 30%, Timing 15%.
Holding company: rated by Piotroski, Buffett, Graham, Lynch; not applicable: Greenblatt. Fair value: Justified P/B = (ROE − g)/(COE − g) × book value. Weights: Quality 45%, Value 10%, Momentum 30%, Timing 15%.
Asset manager: rated by Buffett, Graham, Lynch; not applicable: Piotroski, Greenblatt. Fair value: Justified P/E = payout × (1 + g)/(COE − g) on normalized EPS. Weights: Quality 45%, Value 10%, Momentum 30%, Timing 15%.
Piotroski does not fit insurers, so their Quality axis is Buffett alone, on an adaptation from the 2007 and 2009 letters: underwriting profit, return on equity, growth in book value per share, and premiums against equity.
How Calibration Affects Scores
Leaving a model out is not neutral: a bank's composite rests on fewer models than a general company's, and a company where no Quality or no Value model applies gets no composite at all. That is deliberate — a missing input never raises a score, and a score built on a model that does not describe the business would be worse than none.
Each stock page on AlphaStocks shows which models apply and why the others do not. The methodology page lists every criterion, threshold and source; the screener and rankings use the same composite.
Frequently Asked Questions
Why does AlphaStocks score banks differently from technology stocks?
Because several of the models were written for industrial companies and do not describe a bank: Piotroski needs a current ratio and a gross margin, and Greenblatt excluded financial companies. Rather than invent substitute signals, those models are reported as not applicable. Bank: rated by Buffett, Graham; not applicable: Piotroski, Lynch, Greenblatt. Fair value: Justified P/B = (ROE − g)/(COE − g) × book value. Weights: Quality 45%, Value 10%, Momentum 30%, Timing 15%.
How many sector profiles does AlphaStocks use?
Seven: General, Bank, Insurer, Asset manager, Holding company, Utility, REIT. A profile decides which models apply, which fair value method is used, and the axis weights. The models keep their sources' thresholds in every profile.
What changes in the REIT scoring profile?
REIT: rated by Piotroski, Buffett, Graham, Lynch; not applicable: Greenblatt. Fair value: FFO × Nareit property-group P/FFO. Weights: Quality 35%, Value 15%, Momentum 35%, Timing 15%. Piotroski rates a REIT only when its balance sheet is classified; most REITs present it unclassified and are not applicable.
Can I compare stocks across different sector profiles?
With care. Every composite is built the same way from the models that apply, but a bank is scored by fewer models than a general company, so the same composite rests on less evidence. The model cards on each stock page show which models apply.
Related Guides
AlphaStocks provides algorithm-generated research tools and educational content, not personalized investment advice. Sector calibration ensures fair scoring but does not eliminate investment risk. Always conduct your own due diligence and consult a qualified financial adviser before making investment decisions.