LUV Southwest Airlines Co. - Fundamental Analysis
BEARISH
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LUV Stock | Fundamental Analysis & Investment Insights
NYSE
Industrials
Airlines
Current Price
Live
$43.12
Analyst Target
$41.8
-3.1%
Downside
52W High
$45.02
52W Low
$23.82
At a glance
Key valuation, profitability, growth, and risk metrics.
Updated Jan 17, 2026
Market cap
$22.65B
P/E
68.44
ROE
4.2%
Profit margin
1.4%
Debt/Equity
0.68
Dividend yield
1.67%
AI Analysis
Powered by advanced machine learning algorithms
Confidence Score
85%
Analysis Accuracy
The Advanced Deterministic Scorecard reveals significant concerns with a weak Piotroski F-Score of 4/9, indicating marginal financial health, and the absence of an Altman Z-Score prevents a full distress risk assessment. Despite recent positive earnings surprises and strong short-term price momentum (+37% 1Y), profitability remains thin (1.38% net margin, 0.71% ROA), liquidity is strained (Current Ratio: 0.49), and the dividend is unsustainable with a 114% payout ratio. Valuation metrics are stretched relative to fundamentals—P/E of 68.44 versus a Graham Number of $14.60—while insider selling and a 'hold' analyst consensus suggest caution. The stock appears overvalued on both defensive and growth-based intrinsic models, with deteriorating earnings trends and high financial risk.
Key Strengths
Recent earnings beats with strong positive surprises in multiple quarters (e.g., +1200% in Q4 2024)
Low debt/equity ratio of 0.68, below sector average of 1.54, indicating conservative capital structure
Positive short-term price momentum: +37% 1-year return and +19.3% over 6 months
Dividend yield of 1.67% provides modest income, above some peers
Gross margin of 21.54% remains relatively stable despite sector headwinds
Key Risks
Piotroski F-Score of 4/9 signals weak financial health, particularly in profitability and leverage
Extremely low liquidity: Current Ratio (0.49) and Quick Ratio (0.38) well below 1.0, raising solvency concerns
Unsustainable dividend with payout ratio of 114.29%, risking future cuts
Earnings under pressure: YoY EPS growth of -9.1% and Q/Q decline of -76.7%
High P/E of 68.44 vs. forward P/E of 13.38 suggests speculative premium not supported by current earnings
AI Fair Value Estimate
Based on comprehensive analysis
$14.6
-66.1% below current price
Performance Snowflake
Multi-dimensional analysis across 5 key categories
Overall
33
Weak
25
40
50
30
20
AI Verdict
Overvalued with deteriorating fundamentals and high financial risk
Key drivers: High P/E relative to earnings quality, Weak Piotroski F-Score, Poor liquidity ratios, Unsustainable dividend payout, Insider selling
Confidence
88%
Value
25/100
Ref P/E, PEG, Graham Number
Positives
- Forward P/E of 13.38 suggests improvement expectations
- Price/Sales of 0.82 below sector average
Watchpoints
- Current P/E of 68.44 is extremely high
- Stock trades at nearly 3x the Graham Number ($14.60)
- Intrinsic value estimate of $4.41 implies deep undervaluation on growth model, but not supported by ROIC or growth trends
Future
40/100
Ref Growth rates
Positives
- Forward P/E implies earnings recovery is priced in
- Recent strong earnings surprises suggest potential turnaround
Watchpoints
- Negative earnings growth (YoY: -9.1%, Q/Q: -76.7%)
- No PEG ratio due to unreliable growth expectations
- Revenue growth stagnant at 1.20% YoY
Past
50/100
Ref Historical trends
Positives
- History of beating earnings estimates (149.78% avg surprise over last 4 quarters)
- 5-year price performance flat (-1.2%), but strong 3Y return (+24.5%)
Watchpoints
- Earnings volatility evident in large negative surprises (e.g., -242% in Q1 2023)
- Profitability metrics have declined over time (ROE: 4.17%, ROA: 0.71%)
Health
30/100
Ref Altman Z-Score, Piotroski F-Score
Positives
- Debt/Equity of 0.68 is below sector average
- Piotroski F-Score of 4 indicates some stability
Watchpoints
- Piotroski F-Score below 4 threshold for strong health
- Current Ratio (0.49) and Quick Ratio (0.38) indicate near-term liquidity risk
- Altman Z-Score unavailable, increasing uncertainty
Dividend
20/100
Ref Yield, Payout
Positives
- Current yield of 1.67% is modestly attractive
Watchpoints
- Payout ratio of 114.29% exceeds earnings, making dividend unsafe
- Dividend Strength score of 10/100 indicates high risk
- No visibility on dividend sustainability given earnings volatility
Stock Price & Analyst Targets
Real-time price movements and analyst price targets
Current Price
$43.12
Analyst Target
$41.8
Upside/Downside
-3.1%
Multi-Horizon Performance vs Peers
Price momentum across 5Y → 1W horizons for LUV and closest competitors.
Updated 2026-01-16
| Company | 5Y | 3Y | 1Y | 6M | 1M | 1W |
|---|---|---|---|---|---|---|
|
LUV
Southwest Airlines Co.
Primary
|
-1.2% | +24.5% | +37.0% | +19.3% | +5.7% | -3.1% |
|
AER
AerCap Holdings N.V.
Peer
|
+256.7% | +131.1% | +53.2% | +29.5% | -0.2% | +1.5% |
|
APG
APi Group Corporation
Peer
|
+236.6% | +201.7% | +64.5% | +19.0% | +6.2% | -2.3% |
|
ATI
ATI Inc.
Peer
|
+573.7% | +247.4% | +109.5% | +30.1% | +5.9% | -0.6% |
|
ODFL
Old Dominion Freight Line, Inc.
Peer
|
+31.3% | -15.5% | -40.4% | -22.5% | -2.0% | -5.4% |
Positive values indicate cumulative gains over the specified period. Comparables pulled from the same sector to highlight whether momentum is stock-specific or industry-wide.
Historical Performance Trends
Long-term financial metrics and growth patterns
Revenue & Net Income
Profit & Operating Margins
Return on Equity (ROE)
Quarterly Revenue Growth
Historical data shows last 12 quarters (3 years)
Valuation Metrics
Key valuation ratios and pricing indicators
P/E Ratio
68.44
Forward P/E
13.38
PEG Ratio
N/A
P/B Ratio
2.87
P/S Ratio
0.82
EV/Revenue
0.89
EV/EBITDA
14.56
Market Cap
$22.65B
Profitability
Profit margins and return metrics
Profit Margin
1.38%
Operating Margin
0.5%
Gross Margin
21.54%
ROE
4.17%
ROA
0.71%
Growth
Revenue and earnings growth rates
Revenue Growth
+1.2%
Earnings Growth
-9.1%
Q/Q Revenue Growth
N/A
Q/Q Earnings Growth
-19.4%
Financial Health
Balance sheet strength and liquidity metrics
Debt/Equity
0.68
Moderate
Current Ratio
0.49
Weak
Quick Ratio
0.38
Poor
Cash/Share
$5.84
Quarterly Earnings History
EPS performance vs analyst estimates
2026-01-28
$N/A
2025-10-22
$0.1
+433.3% surprise
2025-07-23
$0.43
-16.2% surprise
2025-04-23
$-0.13
+32.2% surprise
Industrials Sector Comparison
Comparing LUV against 122 companies in the Industrials sector
(6 bullish, 59 neutral, 57 bearish)
P/E Ratio
68.44
This Stock
vs
73.49
Sector Avg
-6.9%
(Discount)
Return on Equity (ROE)
4.17%
This Stock
vs
7.83%
Sector Avg
-46.8%
(Below Avg)
Profit Margin
1.38%
This Stock
vs
57.85%
Sector Avg
-97.6%
(Weaker)
Debt to Equity
0.68
This Stock
vs
5.46
Sector Avg
-87.6%
(Less Debt)
Revenue Growth
1.2%
This Stock
vs
22.8%
Sector Avg
-94.7%
(Slower)
Current Ratio
0.49
This Stock
vs
2.64
Sector Avg
-81.4%
(Weaker)
Similar Companies
Peer comparison within the same industry
| Company | AI Rating | Market Cap | P/E | ROE | Profit Margin | Price | |
|---|---|---|---|---|---|---|---|
|
LUV
Southwest Airlines Co.
|
BEARISH | $22.65B | 68.44 | 4.2% | 1.4% | $43.12 | |
|
AER
AerCap Holdings N.V.
|
NEUTRAL | $25.84B | 6.87 | 21.7% | 45.4% | $144.9 | |
|
APG
APi Group Corporation
|
BEARISH | $18.03B | 116.19 | 8.7% | 3.6% | $41.83 | |
|
ATI
ATI Inc.
|
NEUTRAL | $17.03B | 39.85 | 24.6% | 9.7% | $123.55 | |
|
ODFL
Old Dominion Freight Line, Inc.
|
NEUTRAL | $28.32B | 26.62 | 25.1% | 19.0% | $132.29 |
Recent Insider Trading
Insider buy and sell transactions from the last 6 months
| Date | Insider | Position | Transaction | Shares | Value |
|---|---|---|---|---|---|
| 2025-12-05 | JONES JUSTIN | Officer | Sale | 8,085 | $302,056 |
| 2025-08-06 | SARETSKY GREGG A | Director | Purchase | 3,345 | $100,447 |
| 2025-08-05 | FEINBERG SARAH | Director | Purchase | 1,500 | $45,008 |
Insider transactions can signal confidence or concerns about company prospects
Wall Street Analysts
Professional analyst ratings and price targets
Consensus
HOLD
23 analysts
Goldman Sachs
2026-01-13
Sell
Sell
Susquehanna
2026-01-09
Neutral
Neutral
JP Morgan
2026-01-09
Underweight
Overweight
Citigroup
2026-01-07
Neutral
Neutral
UBS
2026-01-06
Neutral
Neutral
B of A Securities
2026-01-06
Underperform
Underperform
Wells Fargo
2025-12-18
Equal-Weight
Barclays
2025-12-16
Equal-Weight
Overweight
TD Cowen
2025-12-12
Hold
Hold
BMO Capital
2025-12-09
Market Perform
Past News Coverage
Recent headlines mentioning LUV from our newsroom.
Newest → oldest
No matching news yet.