SOUTHWEST AIRLINES CO (LUV) Stock Fundamental Analysis
NYSE:LUV - New York Stock Exchange, Inc. - US8447411088 - Common Stock - Currency: USD
LUV gets a fundamental rating of 4 out of 10. The analysis compared the fundamentals against 23 industry peers in the Passenger Airlines industry. LUV has only an average score on both its financial health and profitability. While showing a medium growth rate, LUV is valued expensive at the moment.
1. Profitability
1.1 Basic Checks
In the past year LUV was profitable.
In the past year LUV had a positive cash flow from operations.
LUV had positive earnings in 4 of the past 5 years.
LUV had a positive operating cash flow in 4 of the past 5 years.
1.2 Ratios
LUV has a better Return On Assets (1.64%) than 65.22% of its industry peers.
LUV's Return On Equity of 5.83% is in line compared to the rest of the industry. LUV outperforms 56.52% of its industry peers.
LUV has a Return On Invested Capital (1.92%) which is in line with its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for LUV is significantly below the industry average of 10.40%.
The last Return On Invested Capital (1.92%) for LUV is above the 3 year average (1.77%), which is a sign of increasing profitability.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.64% | ||
| ROE | 5.83% | ||
| ROIC | 1.92% |
ROA(3y)1.39%
ROA(5y)-0.4%
ROE(3y)4.65%
ROE(5y)-2.26%
ROIC(3y)1.77%
ROIC(5y)N/A
1.3 Margins
LUV's Profit Margin of 1.98% is fine compared to the rest of the industry. LUV outperforms 65.22% of its industry peers.
In the last couple of years the Profit Margin of LUV has declined.
The Operating Margin of LUV (1.78%) is comparable to the rest of the industry.
LUV's Operating Margin has declined in the last couple of years.
Looking at the Gross Margin, with a value of 72.63%, LUV belongs to the top of the industry, outperforming 95.65% of the companies in the same industry.
In the last couple of years the Gross Margin of LUV has remained more or less at the same level.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 1.78% | ||
| PM (TTM) | 1.98% | ||
| GM | 72.63% |
OM growth 3YN/A
OM growth 5Y-38.41%
PM growth 3Y-35.09%
PM growth 5Y-30.26%
GM growth 3Y0.9%
GM growth 5Y-0.77%
2. Health
2.1 Basic Checks
LUV has a Return on Invested Capital (ROIC), which is below the Cost of Capital (WACC), which means it is destroying value.
Compared to 1 year ago, LUV has less shares outstanding
Compared to 5 years ago, LUV has more shares outstanding
LUV has a better debt/assets ratio than last year.
2.2 Solvency
LUV has an Altman-Z score of 1.91. This is not the best score and indicates that LUV is in the grey zone with still only limited risk for bankruptcy at the moment.
LUV's Altman-Z score of 1.91 is amongst the best of the industry. LUV outperforms 82.61% of its industry peers.
A Debt/Equity ratio of 0.44 indicates that LUV is not too dependend on debt financing.
Looking at the Debt to Equity ratio, with a value of 0.44, LUV belongs to the top of the industry, outperforming 82.61% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.44 | ||
| Debt/FCF | N/A | ||
| Altman-Z | 1.91 |
ROIC/WACC0.23
WACC8.45%
2.3 Liquidity
A Current Ratio of 0.77 indicates that LUV may have some problems paying its short term obligations.
The Current ratio of LUV (0.77) is better than 65.22% of its industry peers.
LUV has a Quick Ratio of 0.77. This is a bad value and indicates that LUV is not financially healthy enough and could expect problems in meeting its short term obligations.
LUV's Quick ratio of 0.72 is fine compared to the rest of the industry. LUV outperforms 60.87% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 0.77 | ||
| Quick Ratio | 0.72 |
3. Growth
3.1 Past
The earnings per share for LUV have decreased strongly by -21.62% in the last year.
The earnings per share for LUV have been decreasing by -26.91% on average. This is quite bad
The Revenue has been growing slightly by 3.25% in the past year.
The Revenue has been growing slightly by 4.15% on average over the past years.
EPS 1Y (TTM)-21.62%
EPS 3Y-23.26%
EPS 5Y-26.91%
EPS Q2Q%63.89%
Revenue 1Y (TTM)3.25%
Revenue growth 3Y20.29%
Revenue growth 5Y4.15%
Sales Q2Q%1.56%
3.2 Future
Based on estimates for the next years, LUV will show a very strong growth in Earnings Per Share. The EPS will grow by 35.53% on average per year.
LUV is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 5.50% yearly.
EPS Next Y26.45%
EPS Next 2Y63.23%
EPS Next 3Y55.36%
EPS Next 5Y35.53%
Revenue Next Year2.41%
Revenue Next 2Y4.61%
Revenue Next 3Y4.92%
Revenue Next 5Y5.5%
3.3 Evolution
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
The Revenue growth rate is accelerating: in the next years the growth will be better than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
With a Price/Earnings ratio of 27.35, LUV can be considered very expensive at the moment.
LUV's Price/Earnings ratio is in line with the industry average.
The average S&P500 Price/Earnings ratio is at 26.60. LUV is around the same levels.
A Price/Forward Earnings ratio of 12.81 indicates a correct valuation of LUV.
The rest of the industry has a similar Price/Forward Earnings ratio as LUV.
LUV is valuated rather cheaply when we compare the Price/Forward Earnings ratio to 22.39, which is the current average of the S&P500 Index.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 27.35 | ||
| Fwd PE | 12.81 |
4.2 Price Multiples
The rest of the industry has a similar Enterprise Value to EBITDA ratio as LUV.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | N/A | ||
| EV/EBITDA | 7.91 |
4.3 Compensation for Growth
The PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a correct valuation of the company.
A more expensive valuation may be justified as LUV's earnings are expected to grow with 55.36% in the coming years.
PEG (NY)1.03
PEG (5Y)N/A
EPS Next 2Y63.23%
EPS Next 3Y55.36%
5. Dividend
5.1 Amount
LUV has a Yearly Dividend Yield of 2.22%.
Compared to an average industry Dividend Yield of 2.76, LUV pays a better dividend. On top of this LUV pays more dividend than 91.30% of the companies listed in the same industry.
LUV's Dividend Yield is comparable with the S&P500 average which is at 2.39.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.22% |
5.2 History
The dividend of LUV has a limited annual growth rate of 0.82%.
LUV has been paying a dividend for at least 10 years, so it has a reliable track record.
Dividend Growth(5Y)0.82%
Div Incr Years0
Div Non Decr Years0
5.3 Sustainability
LUV pays out 58.97% of its income as dividend. This is a bit on the high side, but may be sustainable.
The dividend of LUV is growing, but earnings are growing more, so the dividend growth is sustainable.
DP58.97%
EPS Next 2Y63.23%
EPS Next 3Y55.36%
31.73
-0.85 (-2.61%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupTransportation
GICS IndustryPassenger Airlines
Earnings (Last)
Earnings (Next)
Inst Owners92.89%
Inst Owner Change-3.43%
Ins Owners0.78%
Ins Owner Change7.02%
Market Cap18.08B
Analysts56
Price Target30.62 (-3.5%)
Short Float %9.86%
Short Ratio4.1
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.22% |
Yearly Dividend0.72
Dividend Growth(5Y)0.82%
DP58.97%
Div Incr Years0
Div Non Decr Years0
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)27.08%
Min EPS beat(2)25.43%
Max EPS beat(2)28.73%
EPS beat(4)4
Avg EPS beat(4)1017.56%
Min EPS beat(4)13.47%
Max EPS beat(4)4002.62%
EPS beat(8)5
Avg EPS beat(8)534.9%
EPS beat(12)7
Avg EPS beat(12)338.8%
EPS beat(16)9
Avg EPS beat(16)258.33%
Revenue beat(2)1
Avg Revenue beat(2)-0.17%
Min Revenue beat(2)-0.6%
Max Revenue beat(2)0.26%
Revenue beat(4)2
Avg Revenue beat(4)0.02%
Min Revenue beat(4)-0.6%
Max Revenue beat(4)1%
Revenue beat(8)3
Avg Revenue beat(8)-0.49%
Revenue beat(12)3
Avg Revenue beat(12)-0.63%
Revenue beat(16)5
Avg Revenue beat(16)-0.4%
PT rev (1m)1.05%
PT rev (3m)-6.95%
EPS NQ rev (1m)0.54%
EPS NQ rev (3m)-39.46%
EPS NY rev (1m)-19.73%
EPS NY rev (3m)-28.74%
Revenue NQ rev (1m)0.08%
Revenue NQ rev (3m)-6.8%
Revenue NY rev (1m)-0.04%
Revenue NY rev (3m)-3.61%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 27.35 | ||
| Fwd PE | 12.81 | ||
| P/S | 0.66 | ||
| P/FCF | N/A | ||
| P/OCF | 12.68 | ||
| P/B | 1.93 | ||
| P/tB | 2.23 | ||
| EV/EBITDA | 7.91 |
EPS(TTM)1.16
EY3.66%
EPS(NY)2.48
Fwd EY7.81%
FCF(TTM)-0.99
FCFYN/A
OCF(TTM)2.5
OCFY7.89%
SpS48.4
BVpS16.43
TBVpS14.21
PEG (NY)1.03
PEG (5Y)N/A
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.64% | ||
| ROE | 5.83% | ||
| ROCE | 2.54% | ||
| ROIC | 1.92% | ||
| ROICexc | 3.36% | ||
| ROICexgc | 3.79% | ||
| OM | 1.78% | ||
| PM (TTM) | 1.98% | ||
| GM | 72.63% | ||
| FCFM | N/A |
ROA(3y)1.39%
ROA(5y)-0.4%
ROE(3y)4.65%
ROE(5y)-2.26%
ROIC(3y)1.77%
ROIC(5y)N/A
ROICexc(3y)3.36%
ROICexc(5y)N/A
ROICexgc(3y)3.73%
ROICexgc(5y)N/A
ROCE(3y)2.35%
ROCE(5y)N/A
ROICexcg growth 3YN/A
ROICexcg growth 5Y-35.72%
ROICexc growth 3YN/A
ROICexc growth 5Y-35.74%
OM growth 3YN/A
OM growth 5Y-38.41%
PM growth 3Y-35.09%
PM growth 5Y-30.26%
GM growth 3Y0.9%
GM growth 5Y-0.77%
F-Score8
Asset Turnover0.83
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.44 | ||
| Debt/FCF | N/A | ||
| Debt/EBITDA | 1.91 | ||
| Cap/Depr | 120.91% | ||
| Cap/Sales | 7.21% | ||
| Interest Coverage | 2.31 | ||
| Cash Conversion | 66.76% | ||
| Profit Quality | N/A | ||
| Current Ratio | 0.77 | ||
| Quick Ratio | 0.72 | ||
| Altman-Z | 1.91 |
F-Score8
WACC8.45%
ROIC/WACC0.23
Cap/Depr(3y)217.02%
Cap/Depr(5y)146.45%
Cap/Sales(3y)12.59%
Cap/Sales(5y)9.34%
Profit Quality(3y)N/A
Profit Quality(5y)N/A
High Growth Momentum
Growth
EPS 1Y (TTM)-21.62%
EPS 3Y-23.26%
EPS 5Y-26.91%
EPS Q2Q%63.89%
EPS Next Y26.45%
EPS Next 2Y63.23%
EPS Next 3Y55.36%
EPS Next 5Y35.53%
Revenue 1Y (TTM)3.25%
Revenue growth 3Y20.29%
Revenue growth 5Y4.15%
Sales Q2Q%1.56%
Revenue Next Year2.41%
Revenue Next 2Y4.61%
Revenue Next 3Y4.92%
Revenue Next 5Y5.5%
EBIT growth 1Y121.17%
EBIT growth 3YN/A
EBIT growth 5Y-35.86%
EBIT Next Year573.72%
EBIT Next 3Y127.26%
EBIT Next 5Y70.77%
FCF growth 1Y46.84%
FCF growth 3YN/A
FCF growth 5YN/A
OCF growth 1Y-58.36%
OCF growth 3Y-41.62%
OCF growth 5Y-35.02%