SOUTHWEST AIRLINES CO (LUV)
US8447411088 - Common Stock
We assign a fundamental rating of 5 out of 10 to LUV. LUV was compared to 24 industry peers in the Passenger Airlines industry. Both the profitability and the financial health of LUV get a neutral evaluation. Nothing too spectacular is happening here. LUV has a decent growth rate and is not valued too expensively.
1. Profitability
1.1 Basic Checks
In the past year LUV was profitable.
LUV had a positive operating cash flow in the past year.
LUV had positive earnings in 4 of the past 5 years.
Of the past 5 years LUV 4 years had a positive operating cash flow.
1.2 Ratios
The Return On Assets of LUV (1.09%) is better than 62.50% of its industry peers.
LUV has a Return On Equity of 3.85%. This is in the better half of the industry: LUV outperforms 66.67% of its industry peers.
LUV has a Return On Invested Capital of 0.69%. This is comparable to the rest of the industry: LUV outperforms 58.33% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.09% | ||
| ROE | 3.85% | ||
| ROIC | 0.69% |
ROA(3y)1.83%
ROA(5y)1.1%
ROE(3y)6.28%
ROE(5y)1.52%
ROIC(3y)N/A
ROIC(5y)N/A
1.3 Margins
Looking at the Profit Margin, with a value of 1.47%, LUV is in the better half of the industry, outperforming 70.83% of the companies in the same industry.
LUV's Profit Margin has declined in the last couple of years.
LUV has a Operating Margin of 0.83%. This is comparable to the rest of the industry: LUV outperforms 54.17% of its industry peers.
LUV's Operating Margin has declined in the last couple of years.
With an excellent Gross Margin value of 69.88%, LUV belongs to the best of the industry, outperforming 91.67% 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 | 0.83% | ||
| PM (TTM) | 1.47% | ||
| GM | 69.88% |
OM growth 3YN/A
OM growth 5Y-38.55%
PM growth 3YN/A
PM growth 5Y-30.79%
GM growth 3Y1.72%
GM growth 5Y-0.81%
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 increased compared to 1 year ago.
The number of shares outstanding for LUV has been increased compared to 5 years ago.
The debt/assets ratio for LUV has been reduced compared to a year ago.
2.2 Solvency
Based on the Altman-Z score of 1.78, we must say that LUV is in the distress zone and has some risk of bankruptcy.
The Altman-Z score of LUV (1.78) is better than 75.00% of its industry peers.
LUV has a Debt/Equity ratio of 0.78. This is a neutral value indicating LUV is somewhat dependend on debt financing.
LUV has a better Debt to Equity ratio (0.78) than 66.67% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.78 | ||
| Debt/FCF | N/A | ||
| Altman-Z | 1.78 |
ROIC/WACC0.09
WACC7.79%
2.3 Liquidity
A Current Ratio of 1.09 indicates that LUV should not have too much problems paying its short term obligations.
LUV has a Current ratio of 1.09. This is amongst the best in the industry. LUV outperforms 91.67% of its industry peers.
A Quick Ratio of 1.02 indicates that LUV should not have too much problems paying its short term obligations.
LUV has a better Quick ratio (1.02) than 91.67% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.09 | ||
| Quick Ratio | 1.02 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an impressive 28.70% over the past year.
LUV shows a very negative growth in Earnings Per Share. Measured over the last years, the EPS has been decreasing by -18.10% yearly.
Looking at the last year, LUV shows a small growth in Revenue. The Revenue has grown by 7.60% in the last year.
LUV shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 3.50% yearly.
EPS 1Y (TTM)28.7%
EPS 3YN/A
EPS 5Y-18.1%
EPS growth Q2Q-33.33%
Revenue 1Y (TTM)7.6%
Revenue growth 3Y42.34%
Revenue growth 5Y3.5%
Revenue growth Q2Q10.92%
3.2 Future
The Earnings Per Share is expected to grow by 17.57% on average over the next years. This is quite good.
The Revenue is expected to grow by 6.95% on average over the next years.
EPS Next Y3.37%
EPS Next 2Y22.36%
EPS Next 3Y18.22%
EPS Next 5Y17.57%
Revenue Next Year9.27%
Revenue Next 2Y7.69%
Revenue Next 3Y6.7%
Revenue Next 5Y6.95%
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
A Price/Earnings ratio of 18.02 indicates a rather expensive valuation of LUV.
LUV's Price/Earnings ratio is a bit cheaper when compared to the industry. LUV is cheaper than 62.50% of the companies in the same industry.
The average S&P500 Price/Earnings ratio is at 28.06. LUV is valued slightly cheaper when compared to this.
Based on the Price/Forward Earnings ratio of 11.35, the valuation of LUV can be described as reasonable.
Compared to the rest of the industry, the Price/Forward Earnings ratio of LUV indicates a somewhat cheap valuation: LUV is cheaper than 66.67% of the companies listed in the same industry.
LUV is valuated rather cheaply when we compare the Price/Forward Earnings ratio to 20.72, which is the current average of the S&P500 Index.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 18.02 | ||
| Fwd PE | 11.35 |
4.2 Price Multiples
Based on the Enterprise Value to EBITDA ratio, LUV is valued a bit cheaper than 70.83% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | N/A | ||
| EV/EBITDA | 6.24 |
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 18.22% in the coming years. This may justify a more expensive valuation.
PEG (NY)5.35
PEG (5Y)N/A
EPS Next 2Y22.36%
EPS Next 3Y18.22%
5. Dividend
5.1 Amount
LUV has a Yearly Dividend Yield of 2.80%.
LUV's Dividend Yield is rather good when compared to the industry average which is at 7.24. LUV pays more dividend than 87.50% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.41, LUV has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.8% |
5.2 History
The dividend of LUV has a limited annual growth rate of 4.34%.
LUV has been paying a dividend for at least 10 years, so it has a reliable track record.
Dividend Growth(5Y)4.34%
Div Incr Years0
Div Non Decr Years0
5.3 Sustainability
LUV pays out 109.16% 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.
DP109.16%
EPS Next 2Y22.36%
EPS Next 3Y18.22%
SOUTHWEST AIRLINES CO
NYSE:LUV (5/3/2024, 8:58:10 AM)
26.675
+0.27 (+1%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupTransportation
GICS IndustryPassenger Airlines
Earnings (Last)
Earnings (Next)
Inst Owners
Inst Owner Change
Ins Owners
Ins Owner Change
Market Cap15.96B
Analysts
Price Target
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.8% |
Dividend Growth(5Y)
DP
Div Incr Years
Div Non Decr Years
Ex-Date
Surprises & Revisions
EPS beat(2)
Avg EPS beat(2)
Min EPS beat(2)
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EPS beat(8)
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EPS beat(16)
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Revenue beat(2)
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PT rev (1m)
PT rev (3m)
EPS NQ rev (1m)
EPS NQ rev (3m)
EPS NY rev (1m)
EPS NY rev (3m)
Revenue NQ rev (1m)
Revenue NQ rev (3m)
Revenue NY rev (1m)
Revenue NY rev (3m)
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 18.02 | ||
| Fwd PE | 11.35 | ||
| P/S | |||
| P/FCF | |||
| P/OCF | |||
| P/B | |||
| P/tB | |||
| EV/EBITDA |
EPS(TTM)
EY
EPS(NY)
Fwd EY
FCF(TTM)
FCFY
OCF(TTM)
OCFY
SpS
BVpS
TBVpS
PEG (NY)5.35
PEG (5Y)N/A
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.09% | ||
| ROE | 3.85% | ||
| ROCE | |||
| ROIC | |||
| ROICexc | |||
| ROICexgc | |||
| OM | 0.83% | ||
| PM (TTM) | 1.47% | ||
| GM | 69.88% | ||
| FCFM |
ROA(3y)
ROA(5y)
ROE(3y)
ROE(5y)
ROIC(3y)
ROIC(5y)
ROICexc(3y)
ROICexc(5y)
ROICexgc(3y)
ROICexgc(5y)
ROCE(3y)
ROCE(5y)
ROICexcg growth 3Y
ROICexcg growth 5Y
ROICexc growth 3Y
ROICexc growth 5Y
OM growth 3Y
OM growth 5Y
PM growth 3Y
PM growth 5Y
GM growth 3Y
GM growth 5Y
F-Score
Asset Turnover0.74
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.78 | ||
| Debt/FCF | |||
| Debt/EBITDA | |||
| Cap/Depr | |||
| Cap/Sales | |||
| Interest Coverage | |||
| Cash Conversion | |||
| Profit Quality | |||
| Current Ratio | 1.09 | ||
| Quick Ratio | 1.02 | ||
| Altman-Z |
F-Score
WACC
ROIC/WACC
Cap/Depr(3y)
Cap/Depr(5y)
Cap/Sales(3y)
Cap/Sales(5y)
Profit Quality(3y)
Profit Quality(5y)
Growth
EPS 1Y (TTM)28.7%
EPS 3YN/A
EPS 5Y
EPS growth Q2Q
EPS Next Y3.37%
EPS Next 2Y
EPS Next 3Y
EPS Next 5Y
Revenue 1Y (TTM)7.6%
Revenue growth 3Y42.34%
Revenue growth 5Y
Revenue growth Q2Q
Revenue Next Year
Revenue Next 2Y
Revenue Next 3Y
Revenue Next 5Y
EBIT growth 1Y
EBIT growth 3Y
EBIT growth 5Y
EBIT Next Year
EBIT Next 3Y
EBIT Next 5Y
FCF growth 1Y
FCF growth 3Y
FCF growth 5Y
OCF growth 1Y
OCF growth 3Y
OCF growth 5Y