Southwest Airlines Co.
Southwest Airlines Co. Fundamental Analysis
Southwest Airlines Co. (LUV) shows weak financial fundamentals with a PE ratio of 23.86, profit margin of 2.83%, and ROE of 10.67%. The company generates $28.5B in annual revenue with weak year-over-year growth of 2.11%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 28.2/100 based on profitability, valuation, growth, and balance sheet metrics. The F grade reflects weak fundamentals and significant financial concerns.
Fundamental Health Score
We analyze LUV's fundamental strength across five key dimensions:
Efficiency Score
WeakLUV struggles to generate sufficient returns from assets.
Valuation Score
ExcellentLUV trades at attractive valuation levels.
Growth Score
WeakLUV faces weak or negative growth trends.
Financial Health Score
ModerateLUV shows balanced financial health with some risks.
Profitability Score
WeakLUV struggles to sustain strong margins.
Key Financial Metrics
Is LUV Expensive or Cheap?
P/E Ratio
LUV trades at 23.86 times earnings. This indicates a fair valuation.
PEG Ratio
When adjusting for growth, LUV's PEG of 0.33 indicates potential undervaluation.
Price to Book
The market values Southwest Airlines Co. at 2.84 times its book value. This may indicate undervaluation.
EV/EBITDA
Enterprise value stands at 6.30 times EBITDA. This is generally considered low.
How Well Does LUV Make Money?
Net Profit Margin
For every $100 in sales, Southwest Airlines Co. keeps $2.83 as profit after all expenses.
Operating Margin
Core operations generate 3.40 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $10.67 in profit for every $100 of shareholder equity.
ROA
Southwest Airlines Co. generates $2.78 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Southwest Airlines Co. generates limited operating cash flow of $2.37B, signaling weaker underlying cash strength.
Free Cash Flow
Southwest Airlines Co. generates weak or negative free cash flow of $-395.42M, restricting financial flexibility.
FCF Per Share
Each share generates $-0.81 in free cash annually.
FCF Yield
LUV converts -2.07% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
23.86
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
0.33
vs 25 benchmark
P/B Ratio
Price to book value ratio
2.84
vs 25 benchmark
P/S Ratio
Price to sales ratio
0.67
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
0.78
vs 25 benchmark
Current Ratio
Current assets to current liabilities
0.48
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.11
vs 25 benchmark
ROA
Return on assets percentage
0.03
vs 25 benchmark
ROCE
Return on capital employed
0.06
vs 25 benchmark
How LUV Stacks Against Its Sector Peers
| Metric | LUV Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 23.86 | 26.45 | Neutral |
| ROE | 10.67% | 1289.00% | Weak |
| Net Margin | 2.83% | -41634.00% (disorted) | Weak |
| Debt/Equity | 0.78 | 0.71 | Neutral |
| Current Ratio | 0.48 | 10.09 | Weak Liquidity |
| ROA | 2.78% | -1505238.00% (disorted) | Weak |
LUV outperforms its industry in 0 out of 6 key metrics, but lagging in ROE.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Southwest Airlines Co.'s 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
224.52%
Industry Style: Cyclical, Value, Infrastructure
High GrowthEPS CAGR
115.01%
Industry Style: Cyclical, Value, Infrastructure
High GrowthFCF CAGR
271.01%
Industry Style: Cyclical, Value, Infrastructure
High Growth