Southwest Airlines Co.
$40.87
-3.5%Southwest Airlines Co. operates as a passenger airline company that provide scheduled air transportation services in the United States and near-international markets. As of December 31, 2021, the company operated a total fleet of 728 Boeing 737 aircrafts; and served 121 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 10 near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. It also provides inflight entertainment and connectivity services on Wi-Fi enabled aircrafts; and Rapid Rewards loyalty program that enables program members to earn points for dollars spent on Southwest base fares. In addition, the company offers a suite of digital platforms to support customers' travel needs, including websites and apps; and SWABIZ, an online booking tool. Further, it provides ancillary services, such as Southwest's EarlyBird Check-In, upgraded boarding, and transportation of pets and unaccompanied minors. The company was incorporated in 1967 and is headquartered in Dallas, Texas.
At a Glance
Live SnapshotIntrinsic Alpha Methodology
Thesis Lenses
Signal
High confidenceValuation multiple is elevated (P/E 49.8).
Valuation inputs: P/E 49.8, earnings yield +2.0%, momentum -3.5%.
If multiples stay elevated while momentum fades, downside repricing risk rises.
Driver
High confidenceReturn profile is soft (ROE +5.5%, ROIC +1.8%).
Profitability stack: net margin +1.6%, ROE +5.5%, ROIC +1.8%.
Quality deterioration often appears in margins before it shows up in headline EPS.
Risk
High confidenceDownside profile is elevated and scenario stress-testing is essential.
Risk factors: liabilities/assets +72.5%, momentum -3.5%, net margin +1.6%.
Higher leverage with weak momentum and thin margins can amplify drawdown severity.
Southwest Airlines Co. Market vs Earnings Trajectory
Performance Analysis
EPS Growth
Strong earnings growth indicates robust business expansion and improving profitability.
Price-EPS Relationship
Stock price is moving in line with earnings growth—a healthy sign of fundamental-driven valuation.
Stock Price Change
Over the 1Y period, stock price has increased by 26.7%.
P/E Ratio (TTM)
Very high P/E suggests premium valuation or high growth expectations.
Key Insight
Strong earnings growth (+125.7%) is outpacing price appreciation (+26.7%), potentially indicating an attractive entry point as the market may not have fully recognized the improving fundamentals.
Southwest Airlines Co. Fair Value Envelope
Southwest Airlines Co. Profit Bridge
Profitability Analysis
Gross Margin
Thin margins leave little room for error. Cost management and pricing strategy are critical.
Operating Margin
Minimal operating profit suggests high operating costs or pricing challenges. Scalability is concerning.
Net Profit Margin
Minimal profitability after all expenses. Limited financial flexibility for reinvestment or shareholder returns.
Effective Tax Rate
Moderate tax rate typical for most corporations. Represents standard tax burden on profits.
Profitability Insight
Efficient profit conversion: Minimal margin compression from gross to net indicates lean operations and favorable tax/interest environment.
Southwest Airlines Co. Cash Conversion Engine
Cash Flow Quality Analysis
FCF Conversion Rate
Negative free cash flow despite positive earnings raises concerns about cash generation ability or heavy capital requirements.
CapEx Intensity
Very high capital intensity consumes most operating cash flow. Limited flexibility for dividends or debt reduction.
FCF Growth Trend
Strong FCF growth demonstrates improving cash generation and business momentum. Positive signal for sustainability.
Working Capital Impact
Moderate working capital outflow. Typical for growing businesses, but ensure it's supporting revenue growth, not inefficiency.
Cash Flow Quality Insight
Cash flow concerns: Despite profitability, the company is burning cash. Review working capital management, CapEx levels, and sustainability of current operations.
Southwest Airlines Co. Funding & Solvency Profile
Financial Health Analysis
Current Ratio
Warning: Liquidity concerns. Current assets may not be sufficient to cover short-term obligations.
Debt-to-Equity Ratio
Elevated leverage. Debt exceeds equity, which amplifies both gains and risks. Monitor debt servicing ability.
Working Capital
Negative working capital indicates short-term liabilities exceed short-term assets—potential liquidity stress.
Asset Composition
Capital-intensive business with significant long-term investments in property, equipment, or intangibles.
Financial Health Insight
Financial stress indicators: Both liquidity and leverage metrics raise concerns. The company may face challenges meeting obligations and should focus on strengthening its balance sheet.
Southwest Airlines Co. Street Expectations Map
Wall Street analysts project that LUV stock may rise significantly over the coming 12 months. The consensus 1-year price target stands at 48.74, with estimates ranging from a low of 32.00 to a high of 60.00.
The consensus 1-year price target stands at 48.74, with estimates ranging from a low of 32.00 to a high of 60.00.
Analyst Consensus Analysis
Upside Potential
Strong upside potential. Consensus indicates attractive return opportunity with favorable risk-reward profile.
Analyst Agreement
Mixed analyst views. Wide target range suggests differing opinions on key value drivers, growth prospects, or risk factors.
Risk-Reward Profile
Favorable risk-reward. Potential upside significantly exceeds downside risk, offering asymmetric return profile attractive for risk-tolerant investors.
Analyst Conviction
Bearish or uncertain outlook. Limited upside or poor consensus suggests challenges ahead or fundamental concerns.
Market Sentiment Insight
High risk, high reward: Substantial upside potential exists, but wide analyst disagreement signals execution risk or unclear catalysts. Thorough due diligence essential before committing capital.
Southwest Airlines Co. Insider Positioning
During the last 12 months, insiders have purchased $57K and sold $307K worth of LUV shares, resulting in $250K of net selling activity.
3 Months
0
0.00
118
4.48K
-4K
-$4K
3-6 Months
0
0.00
0
0.00
+0
+$0
6-9 Months
0
0.00
8.1K
302.06K
-302K
-$302K
9-12 Months
1.9K
57.02K
0
0.00
+57K
+$57K
Top Buyers
Feinberg Sarah
Director
$39K
Saretsky Gregg A
Director
$18K
Top Sellers
Jones Justin
Officer: Evp Operations
$302K
Atherton Lisa M
Director
$4K
Insider Activity Analysis
Net Insider Sentiment
Strong bearish signal with $250K net selling. Heavy insider selling may indicate concerns about valuation or near-term prospects.
Buy/Sell Ratio
Weak buy/sell ratio. Selling significantly exceeds buying—monitor for potential fundamental concerns.
Recent Trend (3 Months)
Heavy recent selling activity. Recent insider sales notably exceed purchases—may warrant investigation into company developments.
Insider Participation
2 insider buyers and 2 sellers. Equal participation suggests mixed or neutral insider views.
Insider Activity Insight
Persistent selling pressure: Consistent insider selling with weak buy/sell ratio suggests insiders may be capitalizing on current valuation. Exercise caution and review recent earnings quality and management commentary.
luv Dividend History
Learning Layer
Related Guides
Build conviction on LUV by pairing this stock hub with focused valuation guides.
Research Paths
Snapshot
Start with context, operating signals, and key market metrics.
Value Model
Stress test fair value across bear, base, and bull assumptions.
Statements
Validate revenue quality, margins, and balance sheet durability.
Earnings Call
Read management commentary and compare it with reported outcomes.
Dividends
Check payout sustainability and long-term distribution behavior.
Analyst Expectations
Review consensus spread and where estimate risk is concentrated.