SOUTHWEST AIRLINES CO (LUV) Stock Fundamental Analysis
NYSE:LUV - New York Stock Exchange, Inc. - US8447411088 - Common Stock - Currency: USD
Taking everything into account, LUV scores 4 out of 10 in our fundamental rating. LUV was compared to 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.
Of the past 5 years LUV 4 years had a positive operating cash flow.
1.2 Ratios
LUV's Return On Assets of 1.64% is fine compared to the rest of the industry. LUV outperforms 65.22% of its industry peers.
Looking at the Return On Equity, with a value of 5.83%, LUV is in line with its industry, outperforming 56.52% of the companies in the same industry.
LUV has a Return On Invested Capital (1.92%) which is comparable to the rest of the industry.
The Average Return On Invested Capital over the past 3 years for LUV is significantly below the industry average of 11.08%.
The 3 year average ROIC (1.77%) for LUV is below the current ROIC(1.92%), indicating increased profibility in the last year.
| 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 has a Profit Margin of 1.98%. This is in the better half of the industry: LUV outperforms 65.22% of its industry peers.
In the last couple of years the Profit Margin of LUV has declined.
LUV has a Operating Margin (1.78%) which is in line with its industry peers.
In the last couple of years the Operating Margin of LUV has declined.
LUV's Gross Margin of 72.63% is amongst the best of the industry. LUV outperforms 95.65% of its industry peers.
LUV's Gross Margin has been stable in the last couple of years.
| 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
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.
LUV has more shares outstanding than it did 5 years ago.
Compared to 1 year ago, LUV has an improved debt to assets ratio.
2.2 Solvency
LUV has an Altman-Z score of 1.90. 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.
With an excellent Altman-Z score value of 1.90, LUV belongs to the best of the industry, outperforming 82.61% of the companies in the same industry.
LUV has a Debt/Equity ratio of 0.44. This is a healthy value indicating a solid balance between debt and equity.
LUV has a Debt to Equity ratio of 0.44. This is amongst the best in the industry. LUV outperforms 82.61% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.44 | ||
| Debt/FCF | N/A | ||
| Altman-Z | 1.9 |
ROIC/WACC0.23
WACC8.26%
2.3 Liquidity
A Current Ratio of 0.77 indicates that LUV may have some problems paying its short term obligations.
LUV's Current ratio of 0.77 is fine compared to the rest of the industry. LUV outperforms 65.22% of its industry peers.
A Quick Ratio of 0.72 indicates that LUV may have some problems paying its short term obligations.
Looking at the Quick ratio, with a value of 0.72, LUV is in the better half of the industry, outperforming 65.22% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 0.77 | ||
| Quick Ratio | 0.72 |
3. Growth
3.1 Past
LUV shows a strong negative growth in Earnings Per Share. In the last year the EPS decreased by -21.62%.
The earnings per share for LUV have been decreasing by -26.91% on average. This is quite bad
LUV shows a small growth in Revenue. In the last year, the Revenue has grown by 3.25%.
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.
The Revenue is expected to grow by 2.76% on average over the next years.
EPS Next Y26.45%
EPS Next 2Y63.23%
EPS Next 3Y55.36%
EPS Next 5Y35.53%
Revenue Next Year2.4%
Revenue Next 2Y4.56%
Revenue Next 3Y4.87%
Revenue Next 5Y2.76%
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 decreasing: in the next years the growth will be less than in the last years.
4. Valuation
4.1 Price/Earnings Ratio
Based on the Price/Earnings ratio of 26.91, the valuation of LUV can be described as expensive.
The rest of the industry has a similar Price/Earnings ratio as LUV.
When comparing the Price/Earnings ratio of LUV to the average of the S&P500 Index (25.91), we can say LUV is valued inline with the index average.
The Price/Forward Earnings ratio is 12.60, which indicates a correct valuation of LUV.
LUV's Price/Forward Earnings is on the same level as the industry average.
Compared to an average S&P500 Price/Forward Earnings ratio of 21.85, LUV is valued a bit cheaper.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 26.91 | ||
| Fwd PE | 12.6 |
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 | 7.69 |
4.3 Compensation for Growth
LUV's 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)1.02
PEG (5Y)N/A
EPS Next 2Y63.23%
EPS Next 3Y55.36%
5. Dividend
5.1 Amount
LUV has a Yearly Dividend Yield of 2.26%. Purely for dividend investing, there may be better candidates out there.
LUV's Dividend Yield is rather good when compared to the industry average which is at 2.84. LUV pays more dividend than 91.30% of the companies in the same industry.
Compared to an average S&P500 Dividend Yield of 2.36, LUV has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.26% |
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%
31.21
-0.55 (-1.73%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupTransportation
GICS IndustryPassenger Airlines
Earnings (Last)
Earnings (Next)
Inst Owners92.89%
Inst Owner Change-3.45%
Ins Owners0.78%
Ins Owner Change7.38%
Market Cap17.79B
Analysts54
Price Target28.42 (-8.94%)
Short Float %10.78%
Short Ratio4.12
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.26% |
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)-16.08%
PT rev (3m)-16.17%
EPS NQ rev (1m)-28.42%
EPS NQ rev (3m)-39.46%
EPS NY rev (1m)-19.73%
EPS NY rev (3m)-28.74%
Revenue NQ rev (1m)-3.63%
Revenue NQ rev (3m)-6.8%
Revenue NY rev (1m)-1.98%
Revenue NY rev (3m)-3.37%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 26.91 | ||
| Fwd PE | 12.6 | ||
| P/S | 0.64 | ||
| P/FCF | N/A | ||
| P/OCF | 12.47 | ||
| P/B | 1.9 | ||
| P/tB | 2.2 | ||
| EV/EBITDA | 7.69 |
EPS(TTM)1.16
EY3.72%
EPS(NY)2.48
Fwd EY7.94%
FCF(TTM)-0.99
FCFYN/A
OCF(TTM)2.5
OCFY8.02%
SpS48.4
BVpS16.43
TBVpS14.21
PEG (NY)1.02
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 | 1.9 |
F-Score8
WACC8.26%
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 Year2.4%
Revenue Next 2Y4.56%
Revenue Next 3Y4.87%
Revenue Next 5Y2.76%
EBIT growth 1Y121.17%
EBIT growth 3YN/A
EBIT growth 5Y-35.86%
EBIT Next Year654.65%
EBIT Next 3Y128.38%
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%