SOUTHWEST AIRLINES CO (LUV) Stock Fundamental Analysis
USA - New York Stock Exchange - NYSE:LUV - US8447411088 - Common Stock
35.06 USD
+0.7 (+2.04%)
35.1595 USD
+0.1 (+0.28%)
We assign a fundamental rating of 4 out of 10 to LUV. LUV was compared to 22 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 quite expensive at the moment. 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's Return On Assets of 1.34% is fine compared to the rest of the industry. LUV outperforms 68.18% of its industry peers.
LUV's Return On Equity of 4.87% is fine compared to the rest of the industry. LUV outperforms 68.18% of its industry peers.
LUV has a Return On Invested Capital (1.38%) which is in line with its industry peers.
The Average Return On Invested Capital over the past 3 years for LUV is significantly below the industry average of 13.76%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.34% | ||
| ROE | 4.87% | ||
| ROIC | 1.38% |
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 1.38%. This is in the better half of the industry: LUV outperforms 68.18% of its industry peers.
LUV's Profit Margin has declined in the last couple of years.
Looking at the Operating Margin, with a value of 1.14%, LUV is in line with its industry, outperforming 45.45% of the companies in the same industry.
LUV's Operating Margin has declined in the last couple of years.
LUV's Gross Margin of 73.50% is amongst the best of the industry. LUV outperforms 100.00% of its industry peers.
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 | 1.14% | ||
| PM (TTM) | 1.38% | ||
| GM | 73.5% |
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
The Return on Invested Capital (ROIC) is below the Cost of Capital (WACC), so LUV is destroying value.
LUV has less shares outstanding than it did 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
LUV has an Altman-Z score of 2.11. 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.
The Altman-Z score of LUV (2.11) is better than 86.36% of its industry peers.
A Debt/Equity ratio of 0.52 indicates that LUV is somewhat dependend on debt financing.
With an excellent Debt to Equity ratio value of 0.52, LUV belongs to the best of the industry, outperforming 90.91% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.52 | ||
| Debt/FCF | N/A | ||
| Altman-Z | 2.11 |
ROIC/WACC0.17
WACC7.97%
2.3 Liquidity
A Current Ratio of 0.49 indicates that LUV may have some problems paying its short term obligations.
Looking at the Current ratio, with a value of 0.49, LUV is doing worse than 63.64% of the companies in the same industry.
A Quick Ratio of 0.42 indicates that LUV may have some problems paying its short term obligations.
LUV's Quick ratio of 0.42 is on the low side compared to the rest of the industry. LUV is outperformed by 63.64% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 0.49 | ||
| Quick Ratio | 0.42 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an impressive 31.08% over the past year.
Measured over the past years, LUV shows a very negative growth in Earnings Per Share. The EPS has been decreasing by -26.91% on average per year.
The Revenue has been growing slightly by 0.64% in the past year.
Measured over the past years, LUV shows a small growth in Revenue. The Revenue has been growing by 4.15% on average per year.
EPS 1Y (TTM)31.08%
EPS 3Y-23.26%
EPS 5Y-26.91%
EPS Q2Q%-26.67%
Revenue 1Y (TTM)0.64%
Revenue growth 3Y20.29%
Revenue growth 5Y4.15%
Sales Q2Q%1.15%
3.2 Future
The Earnings Per Share is expected to grow by 47.55% on average over the next years. This is a very strong growth
The Revenue is expected to grow by 5.74% on average over the next years.
EPS Next Y21.15%
EPS Next 2Y70.34%
EPS Next 3Y56.92%
EPS Next 5Y47.55%
Revenue Next Year2.59%
Revenue Next 2Y5.18%
Revenue Next 3Y5.21%
Revenue Next 5Y5.74%
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
LUV is valuated quite expensively with a Price/Earnings ratio of 36.14.
LUV's Price/Earnings is on the same level as the industry average.
The average S&P500 Price/Earnings ratio is at 26.15. LUV is valued slightly more expensive when compared to this.
With a Price/Forward Earnings ratio of 12.99, LUV is valued correctly.
Compared to the rest of the industry, the Price/Forward Earnings ratio of LUV is on the same level as its industry peers.
LUV is valuated cheaply when we compare the Price/Forward Earnings ratio to 36.12, which is the current average of the S&P500 Index.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 36.14 | ||
| Fwd PE | 12.99 |
4.2 Price Multiples
LUV's Enterprise Value to EBITDA is on the same level as the industry average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | N/A | ||
| EV/EBITDA | 10.14 |
4.3 Compensation for Growth
LUV's PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a correct valuation of the company.
LUV's earnings are expected to grow with 56.92% in the coming years. This may justify a more expensive valuation.
PEG (NY)1.71
PEG (5Y)N/A
EPS Next 2Y70.34%
EPS Next 3Y56.92%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 2.31%, LUV has a reasonable but not impressive dividend return.
LUV's Dividend Yield is rather good when compared to the industry average which is at 3.06. LUV pays more dividend than 86.36% 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 | 2.31% |
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
105.01% of the earnings are spent on dividend by LUV. This is not a sustainable payout ratio.
LUV's earnings are growing more than its dividend. This makes the dividend growth sustainable.
DP105.01%
EPS Next 2Y70.34%
EPS Next 3Y56.92%
35.06
+0.7 (+2.04%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupTransportation
GICS IndustryPassenger Airlines
Earnings (Last)
Earnings (Next)
Inst Owners95.8%
Inst Owner Change1.69%
Ins Owners0.89%
Ins Owner Change0.07%
Market Cap18.41B
Revenue(TTM)27.55B
Net Income(TTM)379.00M
Analysts56.67
Price Target33.9 (-3.31%)
Short Float %6.46%
Short Ratio3.47
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.31% |
Yearly Dividend0.72
Dividend Growth(5Y)0.82%
DP105.01%
Div Incr Years0
Div Non Decr Years0
Ex-Date
Surprises & Revisions
EPS beat(2)1
Avg EPS beat(2)208.35%
Min EPS beat(2)-16.06%
Max EPS beat(2)432.76%
EPS beat(4)3
Avg EPS beat(4)117.71%
Min EPS beat(4)-16.06%
Max EPS beat(4)432.76%
EPS beat(8)6
Avg EPS beat(8)587.29%
EPS beat(12)6
Avg EPS beat(12)371.4%
EPS beat(16)9
Avg EPS beat(16)286.39%
Revenue beat(2)0
Avg Revenue beat(2)-1.13%
Min Revenue beat(2)-1.68%
Max Revenue beat(2)-0.59%
Revenue beat(4)1
Avg Revenue beat(4)-0.65%
Min Revenue beat(4)-1.68%
Max Revenue beat(4)0.26%
Revenue beat(8)3
Avg Revenue beat(8)-0.55%
Revenue beat(12)3
Avg Revenue beat(12)-0.7%
Revenue beat(16)3
Avg Revenue beat(16)-0.66%
PT rev (1m)4.72%
PT rev (3m)7.09%
EPS NQ rev (1m)0.93%
EPS NQ rev (3m)3.31%
EPS NY rev (1m)15.5%
EPS NY rev (3m)20.03%
Revenue NQ rev (1m)0.8%
Revenue NQ rev (3m)1.95%
Revenue NY rev (1m)0.32%
Revenue NY rev (3m)0.59%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 36.14 | ||
| Fwd PE | 12.99 | ||
| P/S | 0.67 | ||
| P/FCF | N/A | ||
| P/OCF | 9.1 | ||
| P/B | 2.37 | ||
| P/tB | 2.83 | ||
| EV/EBITDA | 10.14 |
EPS(TTM)0.97
EY2.77%
EPS(NY)2.7
Fwd EY7.7%
FCF(TTM)-0.48
FCFYN/A
OCF(TTM)3.85
OCFY10.99%
SpS52.46
BVpS14.81
TBVpS12.4
PEG (NY)1.71
PEG (5Y)N/A
Graham Number17.98
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.34% | ||
| ROE | 4.87% | ||
| ROCE | 1.82% | ||
| ROIC | 1.38% | ||
| ROICexc | 1.67% | ||
| ROICexgc | 1.83% | ||
| OM | 1.14% | ||
| PM (TTM) | 1.38% | ||
| GM | 73.5% | ||
| 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
ROICexgc growth 3YN/A
ROICexgc 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 Turnover0.97
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.52 | ||
| Debt/FCF | N/A | ||
| Debt/EBITDA | 2.13 | ||
| Cap/Depr | 142.48% | ||
| Cap/Sales | 8.25% | ||
| Interest Coverage | 1.93 | ||
| Cash Conversion | 105.86% | ||
| Profit Quality | N/A | ||
| Current Ratio | 0.49 | ||
| Quick Ratio | 0.42 | ||
| Altman-Z | 2.11 |
F-Score8
WACC7.97%
ROIC/WACC0.17
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)31.08%
EPS 3Y-23.26%
EPS 5Y-26.91%
EPS Q2Q%-26.67%
EPS Next Y21.15%
EPS Next 2Y70.34%
EPS Next 3Y56.92%
EPS Next 5Y47.55%
Revenue 1Y (TTM)0.64%
Revenue growth 3Y20.29%
Revenue growth 5Y4.15%
Sales Q2Q%1.15%
Revenue Next Year2.59%
Revenue Next 2Y5.18%
Revenue Next 3Y5.21%
Revenue Next 5Y5.74%
EBIT growth 1Y224.02%
EBIT growth 3YN/A
EBIT growth 5Y-35.86%
EBIT Next Year500.84%
EBIT Next 3Y124.19%
EBIT Next 5Y70.85%
FCF growth 1Y71.51%
FCF growth 3YN/A
FCF growth 5YN/A
OCF growth 1Y-39.03%
OCF growth 3Y-41.62%
OCF growth 5Y-35.02%
SOUTHWEST AIRLINES CO / LUV FAQ
Can you provide the ChartMill fundamental rating for SOUTHWEST AIRLINES CO?
ChartMill assigns a fundamental rating of 4 / 10 to LUV.
What is the valuation status for LUV stock?
ChartMill assigns a valuation rating of 3 / 10 to SOUTHWEST AIRLINES CO (LUV). This can be considered as Overvalued.
What is the profitability of LUV stock?
SOUTHWEST AIRLINES CO (LUV) has a profitability rating of 5 / 10.
Can you provide the PE and PB ratios for LUV stock?
The Price/Earnings (PE) ratio for SOUTHWEST AIRLINES CO (LUV) is 36.14 and the Price/Book (PB) ratio is 2.37.
Can you provide the financial health for LUV stock?
The financial health rating of SOUTHWEST AIRLINES CO (LUV) is 3 / 10.