Southwest Airlines Co

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LUV : NYSE : Services
$47.6 up 0.63 | 1.3%
Today's Range: 47.16 - 47.9
Avg. Daily Volume: 7857300.0
12/06/16 - 3:41 PM ET

Financial Analysis

SOUTHWEST AIRLINES's gross profit margin for the third quarter of its fiscal year 2016 has decreased when compared to the same period a year ago. Sales and net income have dropped, however the growth has outpaced the average competitor within the industry. SOUTHWEST AIRLINES has weak liquidity. Currently, the Quick Ratio is 0.55 which shows a lack of ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow.

During the same period, stockholders' equity ("net worth") has increased by 15.48% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future.

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Income Statement Q3 FY16 Q3 FY15
Net Sales ($mil)5140.05146.0
EBITDA ($mil)1028.01456.0
EBIT ($mil)713.01199.0
Net Income ($mil)389.0584.0

Balance Sheet Q3 FY16 Q3 FY15
Cash & Equiv. ($mil)3446.03096.0
Total Assets ($mil)23045.021159.0
Total Debt ($mil)3295.02668.0
Equity ($mil)8047.06968.0

Profitability Q3 FY16 Q3 FY15
Gross Profit Margin32.4539.41
EBITDA Margin20.028.29
Operating Margin13.8723.3
Sales Turnover0.880.91
Return on Assets9.798.67
Return on Equity28.0626.33
Debt Q3 FY16 Q3 FY15
Current Ratio0.620.65
Interest Expense31.030.0
Interest Coverage23.039.97

Share Data Q3 FY16 Q3 FY15
Shares outstanding (mil)615.6650.36
Div / share0.10.08
Book value / share13.0710.71
Institutional Own % n/a n/a
Avg Daily Volume7776214.07403516.0


BUY. The current P/E ratio indicates a premium compared to an average of 9.79 for the Airlines industry and a significant discount compared to the S&P 500 average of 25.16. For additional comparison, its price-to-book ratio of 3.57 indicates a premium versus the S&P 500 average of 2.79 and a premium versus the industry average of 3.36. The current price-to-sales ratio is well below the S&P 500 average, but above the industry average. Upon assessment of these and other key valuation criteria, SOUTHWEST AIRLINES proves to trade at a premium to investment alternatives within the industry.

1 2 3 4 5
premium   discount
  Price/Cash Flow
1 2 3 4 5
premium   discount
LUV 13.30 Peers 9.79   LUV 7.36 Peers 5.88

Premium. A higher P/E ratio than its peers can signify a more expensive stock or higher growth expectations.

LUV is trading at a significant premium to its peers.


Premium. The P/CF ratio, a stock’s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures.

LUV is trading at a significant premium to its peers.

1 2 3 4 5
premium   discount
  Price to
1 2 3 4 5
premium   discount
LUV 12.62 Peers 12.21   LUV 1.14 Peers 1.32

Average. An average price-to-projected earnings ratio can signify an industry neutral stock price and average future growth expectations.

LUV is trading at a valuation on par with its peers.


Discount. The PEG ratio is the stock’s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples.

LUV trades at a discount to its peers.

1 2 3 4 5
premium   discount
  Earnings Growth
1 2 3 4 5
lower   higher
LUV 3.57 Peers 3.36   LUV 29.04 Peers 20.30

Average. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet.

LUV is trading at a valuation on par with its peers.


Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios.

LUV is expected to have an earnings growth rate that significantly exceeds its peers.

1 2 3 4 5
premium   discount
  Sales Growth
1 2 3 4 5
premium   discount
LUV 1.41 Peers 1.21   LUV 5.32 Peers 2.55

Premium. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales.

LUV is trading at a premium to its industry on this measurement.


Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share.

LUV has a sales growth rate that significantly exceeds its peers.



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