SOUTHWEST AIRLINES CO (LUV) Stock Fundamental Analysis
NYSE:LUV - New York Stock Exchange, Inc. - US8447411088 - Common Stock - Currency: USD
We assign a fundamental rating of 4 out of 10 to LUV. 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. LUV is not valued too expensively and it also shows a decent growth rate.
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 (1.37%) than 60.87% of its industry peers.
LUV has a Return On Equity of 4.48%. This is comparable to the rest of the industry: LUV outperforms 56.52% of its industry peers.
Looking at the Return On Invested Capital, with a value of 1.13%, LUV is in line with its industry, outperforming 47.83% of the companies in the same industry.
Measured over the past 3 years, the Average Return On Invested Capital for LUV is significantly below the industry average of 11.12%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.37% | ||
| ROE | 4.48% | ||
| ROIC | 1.13% |
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
With a Profit Margin value of 1.69%, LUV perfoms like the industry average, outperforming 56.52% of the companies in the same industry.
In the last couple of years the Profit Margin of LUV has declined.
LUV has a Operating Margin (1.17%) which 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 71.72%, LUV belongs to the top of the industry, outperforming 95.65% of the companies in the same industry.
LUV's Gross Margin has been stable in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 1.17% | ||
| PM (TTM) | 1.69% | ||
| GM | 71.72% |
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 increased compared to 1 year ago.
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 1.85. 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 better Altman-Z score (1.85) than 82.61% of its industry peers.
LUV has a Debt/Equity ratio of 0.49. This is a healthy value indicating a solid balance between debt and equity.
With an excellent Debt to Equity ratio value of 0.49, LUV belongs to the best of the industry, outperforming 82.61% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.49 | ||
| Debt/FCF | N/A | ||
| Altman-Z | 1.85 |
ROIC/WACC0.14
WACC8.25%
2.3 Liquidity
LUV has a Current Ratio of 0.92. 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 Current ratio of 0.92 is amongst the best of the industry. LUV outperforms 82.61% of its industry peers.
A Quick Ratio of 0.85 indicates that LUV may have some problems paying its short term obligations.
With a decent Quick ratio value of 0.85, LUV is doing good in the industry, outperforming 78.26% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 0.92 | ||
| Quick Ratio | 0.85 |
3. Growth
3.1 Past
LUV shows a strong negative growth in Earnings Per Share. In the last year the EPS decreased by -40.76%.
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 5.34% in the past year.
The Revenue has been growing slightly by 4.15% on average over the past years.
EPS 1Y (TTM)-40.76%
EPS 3Y-23.26%
EPS 5Y-26.91%
EPS Q2Q%51.35%
Revenue 1Y (TTM)5.34%
Revenue growth 3Y20.29%
Revenue growth 5Y4.15%
Sales Q2Q%3.3%
3.2 Future
LUV is expected to show a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 35.53% yearly.
LUV is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 2.76% yearly.
EPS Next Y57.54%
EPS Next 2Y68.64%
EPS Next 3Y55.36%
EPS Next 5Y35.53%
Revenue Next Year4.47%
Revenue Next 2Y5.3%
Revenue Next 3Y5%
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 26.60, the valuation of LUV can be described as expensive.
LUV's Price/Earnings ratio is in line with the industry average.
Compared to an average S&P500 Price/Earnings ratio of 28.29, LUV is valued at the same level.
With a Price/Forward Earnings ratio of 16.89, LUV is valued correctly.
LUV's Price/Forward Earnings ratio is in line with the industry average.
LUV's Price/Forward Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 21.32.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 26.6 | ||
| Fwd PE | 16.89 |
4.2 Price Multiples
LUV's Enterprise Value to EBITDA ratio is a bit cheaper when compared to the industry. LUV is cheaper than 60.87% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | N/A | ||
| EV/EBITDA | 5.54 |
4.3 Compensation for Growth
LUV's low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap 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)0.46
PEG (5Y)N/A
EPS Next 2Y68.64%
EPS Next 3Y55.36%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 2.91%, LUV has a reasonable but not impressive dividend return.
In the last 3 months the price of LUV has falen by -22.93%. A price decline artificially increases the dividend yield. It may be a sign investors do not expect the dividend to last.
LUV's Dividend Yield is rather good when compared to the industry average which is at 3.05. LUV pays more dividend than 91.30% of the companies in the same industry.
LUV's Dividend Yield is comparable with the S&P500 average which is at 2.51.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.91% |
5.2 History
The dividend of LUV has a limited annual growth rate of 0.71%.
LUV has paid a dividend for at least 10 years, which is a reliable track record.
Dividend Growth(5Y)0.71%
Div Incr Years0
Div Non Decr Years0
5.3 Sustainability
92.67% 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.
DP92.67%
EPS Next 2Y68.64%
EPS Next 3Y55.36%
24.74
-0.12 (-0.48%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupTransportation
GICS IndustryPassenger Airlines
Earnings (Last)
Earnings (Next)
Inst Owners92.89%
Inst Owner Change-0.21%
Ins Owners0.78%
Ins Owner Change7.94%
Market Cap14.20B
Analysts55.33
Price Target33.87 (36.9%)
Short Float %7.12%
Short Ratio4.04
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.91% |
Yearly Dividend0.72
Dividend Growth(5Y)0.71%
DP92.67%
Div Incr Years0
Div Non Decr Years0
Ex-Date
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)2014.02%
Min EPS beat(2)25.43%
Max EPS beat(2)4002.62%
EPS beat(4)3
Avg EPS beat(4)1008.9%
Min EPS beat(4)-5.93%
Max EPS beat(4)4002.62%
EPS beat(8)4
Avg EPS beat(8)529.39%
EPS beat(12)6
Avg EPS beat(12)336.06%
EPS beat(16)9
Avg EPS beat(16)257.04%
Revenue beat(2)2
Avg Revenue beat(2)0.63%
Min Revenue beat(2)0.26%
Max Revenue beat(2)1%
Revenue beat(4)2
Avg Revenue beat(4)-0.43%
Min Revenue beat(4)-2.41%
Max Revenue beat(4)1%
Revenue beat(8)3
Avg Revenue beat(8)-0.58%
Revenue beat(12)3
Avg Revenue beat(12)-0.62%
Revenue beat(16)5
Avg Revenue beat(16)-0.47%
PT rev (1m)2.93%
PT rev (3m)5.78%
EPS NQ rev (1m)-8.29%
EPS NQ rev (3m)-166%
EPS NY rev (1m)-11.22%
EPS NY rev (3m)-10.87%
Revenue NQ rev (1m)-1.24%
Revenue NQ rev (3m)-1.75%
Revenue NY rev (1m)-1.66%
Revenue NY rev (3m)-0.6%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 26.6 | ||
| Fwd PE | 16.89 | ||
| P/S | 0.52 | ||
| P/FCF | N/A | ||
| P/OCF | 30.73 | ||
| P/B | 1.37 | ||
| P/tB | 1.51 | ||
| EV/EBITDA | 5.54 |
EPS(TTM)0.93
EY3.76%
EPS(NY)1.47
Fwd EY5.92%
FCF(TTM)-2.82
FCFYN/A
OCF(TTM)0.81
OCFY3.25%
SpS47.89
BVpS18.03
TBVpS16.34
PEG (NY)0.46
PEG (5Y)N/A
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 1.37% | ||
| ROE | 4.48% | ||
| ROCE | 1.49% | ||
| ROIC | 1.13% | ||
| ROICexc | 1.9% | ||
| ROICexgc | 2.06% | ||
| OM | 1.17% | ||
| PM (TTM) | 1.69% | ||
| GM | 71.72% | ||
| 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)3.72%
ROICexgc(5y)N/A
ROCE(3y)2.35%
ROCE(5y)N/A
ROICexcg growth 3YN/A
ROICexcg growth 5Y-36.05%
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-Score7
Asset Turnover0.81
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.49 | ||
| Debt/FCF | N/A | ||
| Debt/EBITDA | 2.56 | ||
| Cap/Depr | 125.53% | ||
| Cap/Sales | 7.57% | ||
| Interest Coverage | 250 | ||
| Cash Conversion | 23.36% | ||
| Profit Quality | N/A | ||
| Current Ratio | 0.92 | ||
| Quick Ratio | 0.85 | ||
| Altman-Z | 1.85 |
F-Score7
WACC8.25%
ROIC/WACC0.14
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)-40.76%
EPS 3Y-23.26%
EPS 5Y-26.91%
EPS Q2Q%51.35%
EPS Next Y57.54%
EPS Next 2Y68.64%
EPS Next 3Y55.36%
EPS Next 5Y35.53%
Revenue 1Y (TTM)5.34%
Revenue growth 3Y20.29%
Revenue growth 5Y4.15%
Sales Q2Q%3.3%
Revenue Next Year4.47%
Revenue Next 2Y5.3%
Revenue Next 3Y5%
Revenue Next 5Y2.76%
EBIT growth 1Y-3.02%
EBIT growth 3YN/A
EBIT growth 5Y-35.86%
EBIT Next Year654.65%
EBIT Next 3Y128.38%
EBIT Next 5Y70.77%
FCF growth 1Y-315.94%
FCF growth 3YN/A
FCF growth 5YN/A
OCF growth 1Y-85.4%
OCF growth 3Y-41.62%
OCF growth 5Y-35.02%