SOUTHWEST AIRLINES CO (LUV) Stock Fundamental Analysis
USA - NYSE:LUV - US8447411088 - Common Stock
32.52 USD
+0.21 (+0.65%)
32.6 USD
+0.08 (+0.25%)
Overall LUV gets a fundamental rating of 4 out of 10. We evaluated LUV against 21 industry peers in the Passenger Airlines industry. While LUV is still in line with the averages on profitability rating, there are concerns on its financial health. LUV is valied quite expensively at the moment, while it does show a decent growth rate.
1. Profitability
1.1 Basic Checks
LUV had positive earnings in the past year.
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 Return On Assets of 1.37%. This is in the better half of the industry: LUV outperforms 61.90% of its industry peers.
Looking at the Return On Equity, with a value of 4.90%, LUV is in the better half of the industry, outperforming 61.90% of the companies in the same industry.
With a Return On Invested Capital value of 1.35%, LUV perfoms like the industry average, outperforming 42.86% of the companies in the same industry.
LUV had an Average Return On Invested Capital over the past 3 years of 1.77%. This is significantly below the industry average of 14.49%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.37% | ||
| ROE | 4.9% | ||
| ROIC | 1.35% |
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 has a Profit Margin of 1.43%. This is in the better half of the industry: LUV outperforms 61.90% of its industry peers.
LUV's Profit Margin has declined in the last couple of years.
LUV has a Operating Margin of 1.16%. This is comparable to the rest of the industry: LUV outperforms 47.62% of its industry peers.
In the last couple of years the Operating Margin of LUV has declined.
LUV's Gross Margin of 73.31% is amongst the best of the industry. LUV outperforms 100.00% of its industry peers.
LUV's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 1.16% | ||
| PM (TTM) | 1.43% | ||
| GM | 73.31% |
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
With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), LUV is destroying value.
The number of shares outstanding for LUV has been reduced compared to 1 year ago.
Compared to 5 years ago, LUV has more shares outstanding
Compared to 1 year ago, LUV has an improved debt to assets ratio.
2.2 Solvency
LUV has an Altman-Z score of 2.07. 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 has a Altman-Z score of 2.07. This is amongst the best in the industry. LUV outperforms 85.71% of its industry peers.
LUV has a Debt/Equity ratio of 0.51. This is a neutral value indicating LUV is somewhat dependend on debt financing.
The Debt to Equity ratio of LUV (0.51) is better than 85.71% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.51 | ||
| Debt/FCF | N/A | ||
| Altman-Z | 2.07 |
ROIC/WACC0.16
WACC8.41%
2.3 Liquidity
A Current Ratio of 0.56 indicates that LUV may have some problems paying its short term obligations.
LUV has a Current ratio (0.56) which is in line with its industry peers.
A Quick Ratio of 0.49 indicates that LUV may have some problems paying its short term obligations.
Looking at the Quick ratio, with a value of 0.49, LUV is doing worse than 61.90% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 0.56 | ||
| Quick Ratio | 0.49 |
3. Growth
3.1 Past
LUV shows a small growth in Earnings Per Share. In the last year, the EPS has grown by 4.12%.
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 1.63% in the past year.
LUV shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 4.15% yearly.
EPS 1Y (TTM)4.12%
EPS 3Y-23.26%
EPS 5Y-26.91%
EPS Q2Q%-25.86%
Revenue 1Y (TTM)1.63%
Revenue growth 3Y20.29%
Revenue growth 5Y4.15%
Sales Q2Q%-1.5%
3.2 Future
LUV is expected to show a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 48.23% yearly.
LUV is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 5.51% yearly.
EPS Next Y2.27%
EPS Next 2Y60.8%
EPS Next 3Y54.34%
EPS Next 5Y48.23%
Revenue Next Year1.98%
Revenue Next 2Y4.52%
Revenue Next 3Y4.92%
Revenue Next 5Y5.51%
3.3 Evolution
The EPS growth rate is accelerating: in the next years the growth will be better than in the last years.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
4. Valuation
4.1 Price/Earnings Ratio
The Price/Earnings ratio is 32.20, which means the current valuation is very expensive for LUV.
Compared to the rest of the industry, the Price/Earnings ratio of LUV is on the same level as its industry peers.
The average S&P500 Price/Earnings ratio is at 27.86. LUV is around the same levels.
LUV is valuated correctly with a Price/Forward Earnings ratio of 13.52.
The rest of the industry has a similar Price/Forward Earnings ratio as LUV.
Compared to an average S&P500 Price/Forward Earnings ratio of 23.32, LUV is valued a bit cheaper.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 32.2 | ||
| Fwd PE | 13.52 |
4.2 Price Multiples
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of LUV is on the same level as its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | N/A | ||
| EV/EBITDA | 8.62 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates LUV does not grow enough to justify the current Price/Earnings ratio.
LUV's earnings are expected to grow with 54.34% in the coming years. This may justify a more expensive valuation.
PEG (NY)14.17
PEG (5Y)N/A
EPS Next 2Y60.8%
EPS Next 3Y54.34%
5. Dividend
5.1 Amount
LUV has a Yearly Dividend Yield of 2.23%.
Compared to an average industry Dividend Yield of 2.73, LUV pays a better dividend. On top of this LUV pays more dividend than 90.48% of the companies listed in the same industry.
LUV's Dividend Yield is comparable with the S&P500 average which is at 2.41.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.23% |
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 108.42% of its income as dividend. This is not a sustainable payout ratio.
LUV's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP108.42%
EPS Next 2Y60.8%
EPS Next 3Y54.34%
32.52
+0.21 (+0.65%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupTransportation
GICS IndustryPassenger Airlines
Earnings (Last)
Earnings (Next)
Inst Owners95.8%
Inst Owner Change-3.95%
Ins Owners0.89%
Ins Owner Change1.11%
Market Cap17.08B
Analysts55.86
Price Target32.37 (-0.46%)
Short Float %7.38%
Short Ratio3.86
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.23% |
Yearly Dividend0.72
Dividend Growth(5Y)0.82%
DP108.42%
Div Incr Years0
Div Non Decr Years0
Ex-Date
Surprises & Revisions
EPS beat(2)1
Avg EPS beat(2)6.33%
Min EPS beat(2)-16.06%
Max EPS beat(2)28.73%
EPS beat(4)3
Avg EPS beat(4)1010.18%
Min EPS beat(4)-16.06%
Max EPS beat(4)4002.62%
EPS beat(8)5
Avg EPS beat(8)533.15%
EPS beat(12)6
Avg EPS beat(12)336.74%
EPS beat(16)9
Avg EPS beat(16)260.38%
Revenue beat(2)0
Avg Revenue beat(2)-1.14%
Min Revenue beat(2)-1.68%
Max Revenue beat(2)-0.6%
Revenue beat(4)2
Avg Revenue beat(4)-0.26%
Min Revenue beat(4)-1.68%
Max Revenue beat(4)1%
Revenue beat(8)3
Avg Revenue beat(8)-0.68%
Revenue beat(12)3
Avg Revenue beat(12)-0.72%
Revenue beat(16)4
Avg Revenue beat(16)-0.56%
PT rev (1m)2.47%
PT rev (3m)6.14%
EPS NQ rev (1m)0%
EPS NQ rev (3m)-120.71%
EPS NY rev (1m)1.33%
EPS NY rev (3m)-17.28%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)-2.13%
Revenue NY rev (1m)0%
Revenue NY rev (3m)-0.32%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 32.2 | ||
| Fwd PE | 13.52 | ||
| P/S | 0.62 | ||
| P/FCF | N/A | ||
| P/OCF | 9.23 | ||
| P/B | 2.13 | ||
| P/tB | 2.54 | ||
| EV/EBITDA | 8.62 |
EPS(TTM)1.01
EY3.11%
EPS(NY)2.4
Fwd EY7.39%
FCF(TTM)-0.52
FCFYN/A
OCF(TTM)3.52
OCFY10.84%
SpS52.31
BVpS15.23
TBVpS12.82
PEG (NY)14.17
PEG (5Y)N/A
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.37% | ||
| ROE | 4.9% | ||
| ROCE | 1.78% | ||
| ROIC | 1.35% | ||
| ROICexc | 1.72% | ||
| ROICexgc | 1.89% | ||
| OM | 1.16% | ||
| PM (TTM) | 1.43% | ||
| GM | 73.31% | ||
| 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 Turnover0.96
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.51 | ||
| Debt/FCF | N/A | ||
| Debt/EBITDA | 2.08 | ||
| Cap/Depr | 129.45% | ||
| Cap/Sales | 7.73% | ||
| Interest Coverage | 1.83 | ||
| Cash Conversion | 94.54% | ||
| Profit Quality | N/A | ||
| Current Ratio | 0.56 | ||
| Quick Ratio | 0.49 | ||
| Altman-Z | 2.07 |
F-Score8
WACC8.41%
ROIC/WACC0.16
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)4.12%
EPS 3Y-23.26%
EPS 5Y-26.91%
EPS Q2Q%-25.86%
EPS Next Y2.27%
EPS Next 2Y60.8%
EPS Next 3Y54.34%
EPS Next 5Y48.23%
Revenue 1Y (TTM)1.63%
Revenue growth 3Y20.29%
Revenue growth 5Y4.15%
Sales Q2Q%-1.5%
Revenue Next Year1.98%
Revenue Next 2Y4.52%
Revenue Next 3Y4.92%
Revenue Next 5Y5.51%
EBIT growth 1Y281.71%
EBIT growth 3YN/A
EBIT growth 5Y-35.86%
EBIT Next Year500.84%
EBIT Next 3Y124.19%
EBIT Next 5Y72.34%
FCF growth 1Y81.77%
FCF growth 3YN/A
FCF growth 5YN/A
OCF growth 1Y-36.95%
OCF growth 3Y-41.62%
OCF growth 5Y-35.02%