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. Both the profitability and the financial health of LUV get a neutral evaluation. Nothing too spectacular is happening here. LUV has a correct valuation and a medium growth rate.
1. Profitability
1.1 Basic Checks
In the past year LUV was profitable.
LUV had a positive operating cash flow in the past year.
Of the past 5 years LUV 4 years were profitable.
Of the past 5 years LUV 4 years had a positive operating cash flow.
1.2 Ratios
Looking at the Return On Assets, with a value of 1.37%, LUV is in the better half of the industry, outperforming 60.87% of the companies in the same industry.
Looking at the Return On Equity, with a value of 4.48%, LUV is in the better half of the industry, outperforming 60.87% of the companies in the same industry.
LUV has a Return On Invested Capital (1.13%) which is in line with its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for LUV is significantly below the industry average of 8.77%.
| 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
LUV has a better Profit Margin (1.69%) than 60.87% of its industry peers.
LUV's Profit Margin has declined in the last couple of years.
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.
LUV has a better Gross Margin (71.72%) than 91.30% 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 | 1.17% | ||
| 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
The Return on Invested Capital (ROIC) is below the Cost of Capital (WACC), so LUV is destroying value.
Compared to 1 year ago, LUV has more shares outstanding
The number of shares outstanding for LUV has been increased compared to 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 1.95. 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's Altman-Z score of 1.95 is amongst the best of the industry. LUV outperforms 82.61% of its industry peers.
A Debt/Equity ratio of 0.49 indicates that LUV is not too dependend on debt financing.
The Debt to Equity ratio of LUV (0.49) is better than 86.96% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.49 | ||
| Debt/FCF | N/A | ||
| Altman-Z | 1.95 |
ROIC/WACC0.13
WACC9.03%
2.3 Liquidity
A Current Ratio of 0.92 indicates that LUV may have some problems paying its short term obligations.
Looking at the Current ratio, with a value of 0.92, LUV belongs to the top of the industry, outperforming 82.61% of the companies in the same industry.
A Quick Ratio of 0.85 indicates that LUV may have some problems paying its short term obligations.
LUV's Quick ratio of 0.85 is fine compared to the rest of the industry. LUV outperforms 78.26% of its industry peers.
| 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%.
LUV shows a very negative growth in Earnings Per Share. Measured over the last years, the EPS has been decreasing by -26.91% yearly.
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 49.50% yearly.
LUV is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 3.11% yearly.
EPS Next Y77.46%
EPS Next 2Y61.56%
EPS Next 3Y50.85%
EPS Next 5Y49.5%
Revenue Next Year5.97%
Revenue Next 2Y5.6%
Revenue Next 3Y5.22%
Revenue Next 5Y3.11%
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 32.05, the valuation of LUV can be described as expensive.
Compared to the rest of the industry, the Price/Earnings ratio of LUV is on the same level as its industry peers.
LUV's Price/Earnings ratio indicates a similar valuation than the S&P500 average which is at 29.63.
The Price/Forward Earnings ratio is 18.06, which indicates a rather expensive current valuation of LUV.
Compared to the rest of the industry, the Price/Forward Earnings ratio of LUV is on the same level as its industry peers.
LUV's Price/Forward Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 22.68.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 32.05 | ||
| Fwd PE | 18.06 |
4.2 Price Multiples
LUV's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. LUV is cheaper than 82.61% of the companies in the same industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | N/A | ||
| EV/EBITDA | 7.53 |
4.3 Compensation for Growth
The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
LUV's earnings are expected to grow with 50.85% in the coming years. This may justify a more expensive valuation.
PEG (NY)0.41
PEG (5Y)N/A
EPS Next 2Y61.56%
EPS Next 3Y50.85%
5. Dividend
5.1 Amount
LUV has a Yearly Dividend Yield of 2.41%. Purely for dividend investing, there may be better candidates out there.
Compared to an average industry Dividend Yield of 2.75, LUV pays a better dividend. On top of this LUV pays more dividend than 91.30% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.29, LUV has a dividend comparable with the average S&P500 company.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.41% |
5.2 History
The dividend of LUV has a limited annual growth rate of 0.71%.
LUV has been paying a dividend for at least 10 years, so it has 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.
The dividend of LUV is growing, but earnings are growing more, so the dividend growth is sustainable.
DP92.67%
EPS Next 2Y61.56%
EPS Next 3Y50.85%
29.81
-0.8 (-2.61%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupTransportation
GICS IndustryPassenger Airlines
Earnings (Last)
Earnings (Next)
Inst Owners99.68%
Inst Owner Change-2.34%
Ins Owners0.74%
Ins Owner Change75.55%
Market Cap17.67B
Analysts53.33
Price Target33.91 (13.75%)
Short Float %5.92%
Short Ratio4.53
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.41% |
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)5.9%
PT rev (3m)15.84%
EPS NQ rev (1m)-131.82%
EPS NQ rev (3m)-293.45%
EPS NY rev (1m)0.39%
EPS NY rev (3m)2.63%
Revenue NQ rev (1m)0.56%
Revenue NQ rev (3m)-2.58%
Revenue NY rev (1m)0.83%
Revenue NY rev (3m)1.1%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 32.05 | ||
| Fwd PE | 18.06 | ||
| P/S | 0.64 | ||
| P/FCF | N/A | ||
| P/OCF | 38.24 | ||
| P/B | 1.71 | ||
| P/tB | 1.88 | ||
| EV/EBITDA | 7.53 |
EPS(TTM)0.93
EY3.12%
EPS(NY)1.65
Fwd EY5.54%
FCF(TTM)-2.73
FCFYN/A
OCF(TTM)0.78
OCFY2.62%
SpS46.37
BVpS17.46
TBVpS15.83
PEG (NY)0.41
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 | 1.95 |
F-Score7
WACC9.03%
ROIC/WACC0.13
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 Y77.46%
EPS Next 2Y61.56%
EPS Next 3Y50.85%
EPS Next 5Y49.5%
Revenue 1Y (TTM)5.34%
Revenue growth 3Y20.29%
Revenue growth 5Y4.15%
Sales Q2Q%3.3%
Revenue Next Year5.97%
Revenue Next 2Y5.6%
Revenue Next 3Y5.22%
Revenue Next 5Y3.11%
EBIT growth 1Y-3.02%
EBIT growth 3YN/A
EBIT growth 5Y-35.86%
EBIT Next Year679.31%
EBIT Next 3Y125.04%
EBIT Next 5Y99.29%
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%