Now trading at a price of $33.35, Southwest Airlines Company has moved -1.1% so far today.
Southwest Airlines Company returned losses of -14.0% last year, with its stock price reaching a high of $40.39 and a low of $28.4. Over the same period, the stock underperformed the S&P 500 index by -22.0%. As of April 2023, the company's 50-day average price was $34.24. Southwest Airlines Co. operates as a passenger airline company that provide scheduled air transportation services in the United States and near-international markets. Based in Dallas, TX, the large-cap Consumer Discretionary company has 71,299 full time employees. Southwest Airlines Company has offered a 1.6% dividend yield over the last 12 months.
Low Leverage Levels but a Declining EPS Growth Trend:
| 2020-02-04 | 2021-02-08 | 2022-02-07 | 2023-02-07 | |
|---|---|---|---|---|
| Revenue (MM) | $22,428 | $9,048 | $15,790 | $23,814 |
| Gross Margins | 32.1% | -7.0% | 34.1% | 25.6% |
| Operating Margins | 13.2% | -42.2% | 10.9% | 4.3% |
| Net Margins | 10.26% | -33.97% | 6.19% | 2.26% |
| Net Income (MM) | $2,300 | -$3,074 | $977 | $539 |
| Net Interest Expense (MM) | -$28 | -$317 | -$454 | -$123 |
| Depreciation & Amort. (MM) | -$1,219 | -$1,255 | -$1,272 | -$1,351 |
| Earnings Per Share | $4.27 | -$5.44 | $1.61 | $1.09 |
| EPS Growth | n/a | -227.4% | 129.6% | -32.3% |
| Diluted Shares (MM) | 539 | 565 | 607 | 595 |
| Free Cash Flow (MM) | $4,614 | -$1,040 | $2,833 | $7,736 |
| Capital Expenditures (MM) | -$627 | -$87 | -$511 | -$3,946 |
| Net Current Assets (MM) | -$10,089 | -$10,539 | -$7,870 | -$9,874 |
| Current Ratio | 0.67 | 2.02 | 1.97 | 1.43 |
| Long Term Debt (MM) | $1,846 | $10,111 | $10,274 | $8,046 |
| Net Debt / EBITDA | 0.04 | 2.29 | -0.74 | -0.77 |
Southwest Airlines Company has low leverage, weak revenue growth and increasing reinvestment in the business, and generally positive cash flows. However, Southwest Airlines Company has slimmer gross margins than its peers, consistently negative margins with a negative growth trend, and declining EPS growth. Finally, we note that Southwest Airlines Company has just enough current assets to cover current liabilities.
A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
Southwest Airlines Company has a trailing twelve month P/E ratio of 31.4, compared to an average of 22.33 for the Consumer Discretionary sector. Based on its EPS guidance of $2.9, the company has a forward P/E ratio of 11.8. The -7.4% compound average growth rate of Southwest Airlines Company's historical and projected earnings per share yields a PEG ratio of -4.22. This indicates that its shares are overvalued.In contrast, the market is likely undervaluing Southwest Airlines Company in terms of its equity because its P/B ratio is 1.84 while the sector average is 3.12. The company's shares are currently trading 168.0% above their Graham number. In conclusion, Southwest Airlines Company's impressive cash flow trend, decent P/B ratio, and reasonable use of leverage demonstrate that the company may still be fairly valued — despite its elevated earnings multiple.
There's an Analyst Consensus of Some Upside Potential for Southwest Airlines Company:
The 16 analysts following Southwest Airlines Company have set target prices ranging from $25.0 to $55.0 per share, for an average of $37.06 with a hold rating. As of April 2023, the company is trading -7.6% away from its average target price, indicating that there is an analyst consensus of some upside potential.
Southwest Airlines Company has an average amount of shares sold short because 3.6% of the company's shares are sold short. Institutions own 78.0% of the company's shares, and the insider ownership rate stands at 0.36%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 11% stake in the company is worth $2,209,038,712.
