Southwest Airlines Company logged a -0.3% change during today's morning session, and is now trading at a price of $26.48 per share.
Southwest Airlines Company returned losses of -17.0% last year, with its stock price reaching a high of $40.38 and a low of $26.48. Over the same period, the stock underperformed the S&P 500 index by -33.0%. As of April 2023, the company's 50-day average price was $31.99. 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 2.0% dividend yield over the last 12 months.
Low Leverage Levels but a Declining EPS Growth Trend:
| 2018-02-07 | 2019-02-05 | 2020-02-04 | 2021-02-08 | 2022-02-07 | 2023-02-07 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $21,146 | $21,965 | $22,428 | $9,048 | $15,790 | $23,814 |
| Gross Margins | 35.0% | 33.0% | 32.0% | -7.0% | 34.0% | 26.0% |
| Operating Margins | 16% | 15% | 13% | -42% | 11% | 4% |
| Net Margins | 16.0% | 11.0% | 10.0% | -34.0% | 6.0% | 2.0% |
| Net Income (MM) | $3,357 | $2,465 | $2,300 | -$3,074 | $977 | $539 |
| Net Interest Expense (MM) | -$79 | -$62 | -$28 | -$317 | -$454 | -$123 |
| Depreciation & Amort. (MM) | -$1,218 | -$1,201 | -$1,219 | -$1,255 | -$1,272 | -$1,351 |
| Earnings Per Share | $5.57 | $4.29 | $4.27 | -$5.44 | $1.61 | $0.89 |
| EPS Growth | n/a | -22.98% | -0.47% | -227.4% | 129.6% | -44.72% |
| Diluted Shares (MM) | 603 | 574 | 539 | 565 | 607 | 607 |
| Free Cash Flow (MM) | $6,178 | $6,869 | $4,614 | -$1,040 | $2,833 | $7,736 |
| Capital Expenditures (MM) | -$2,249 | -$1,976 | -$627 | -$87 | -$511 | -$3,946 |
| Net Current Assets (MM) | -$10,654 | -$11,362 | -$10,089 | -$10,539 | -$7,870 | -$9,874 |
| Long Term Debt (MM) | $3,320 | $2,771 | $1,846 | $10,111 | $10,274 | $8,046 |
| Net Debt / EBITDA | 0.09 | -0.07 | -0.34 | 1.17 | -1.6 | -1.78 |
Southwest Airlines Company has low leverage, wider gross margins than its peer group, and decent operating margins with a negative growth trend. However, the firm has declining EPS growth. Finally, we note that Southwest Airlines Company has weak revenue growth and a flat capital expenditure trend, irregular cash flows, and 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 34.0, compared to an average of 22.33 for the Consumer Discretionary sector. Based on its EPS guidance of $2.62, the company has a forward P/E ratio of 12.2. The company doesn't issue forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is -25.7%. On this basis, the company's PEG ratio is -1.33, which indicates that its shares are overpriced. In contrast, the market is likely undervaluing Southwest Airlines Company in terms of its equity because its P/B ratio is 1.46 while the sector average is 3.12. The company's shares are currently trading 41.0% 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.
Southwest Airlines Company Has an Average Rating of Hold:
The 15 analysts following Southwest Airlines Company have set target prices ranging from $25.0 to $55.0 per share, for an average of $34.72 with a hold rating. As of April 2023, the company is trading -7.9% away from its average target price, indicating that there is an analyst consensus of strong upside potential.
Southwest Airlines Company has an average amount of shares sold short because 4.5% 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 $1,747,522,810.
