Southwest Airlines (LUV)
Industrials · $22.7B market cap · SEC CIK 0000092380
ahead of 51% of the S&P 500 · #37 of 79 in Industrials
Next reports on Jan 28, 2027, after the close, with analysts expecting $0.72 in earnings per share.
52-week range $30.85 to $55.11. 16% below its 52-week high and 50% above its low.
The case for LUV
- Cheap for its growth: 21.5× earnings, where 22% a year of growth plus a 2.9% dividend would justify about 45×.
- Revenue growing 14.5% year over year.
- Earnings per share up 213.4%.
- Pays a 2.9% dividend while you wait.
- Has compounded revenue at 25.4% a year over five years.
- Gross margin of 68% absorbs cost shocks.
The case against
- Burned $831M of free cash in FY2025.
- Growth is slowing: revenue up 14.5% this year against 25.4% a year over five.
- Net margin of 3.3% leaves very little room for error.
- Current liabilities exceed current assets (ratio 0.47).
- Free-cash-flow yield of −3.7% is lower than 100% of Industrials companies.
What the score is made of
Each factor is half a curve over reported figures and half a rank among the other Industrials companies (momentum is judged against fixed thresholds only), and the five are blended by weight. The score is where that blend places it in the S&P 500. It describes the last filing and the current price. It is not a forecast.
| Valuewhat you pay for the earnings and cash, against the growth you get | 54 |
|---|---|
| Growthhow fast revenue and earnings are moving, this year and over five | 91 |
| Profitabilityhow much of the revenue becomes profit, and how much of that is cash | 23 |
| Momentumhow the price has behaved lately | 69 |
| Stabilityhow violently it moves, what it owes and what it pays you | 47 |
- Each factor except momentum is half fixed thresholds, half rank among the 79 Industrials companies.
The financials
Revenue growth
Is the business growing? Yes
| Last 12 months | +14.5% |
|---|---|
| Over 5 years | +25.4% a year |
| FY2025 revenue | $28.1B (+2%) |
Free cash flow
Is it generating real cash? No, it is burning cash
| FY2025 free cash flow | −$831M |
|---|---|
| Of revenue | −3% |
| Of profit | −188% |
Profit margins
Is profitability improving? Yes, improving
| Gross margin | 68% |
|---|---|
| Operating margin | 4% |
| Net margin, FY24 → FY25 → now | 1.7% → 1.6% → 3.3% |
Debt vs. cash
Is the balance sheet healthy? Yes, the debt is manageable
| Cash | $3.2B |
|---|---|
| Long-term debt | $4.9B |
| Net debt | $1.7B |
| Years to repay | 2.7 yrs |
Valuation
Is the stock price reasonable? Mixed: cheap on earnings, dear on cash
| P/E | 21.5× |
|---|---|
| Fair P/E for its growth | 45× |
| P/FCF | no free cash flow |
| Forward P/E | 10.8× |
| EV / EBITDA | 11.4× |
At 21.5× earnings it trades well below the 45× that 22% a year of growth plus a 2.9% dividend would justify. Its free cash flow is negative, which counts against it.
The financials, five years deep
Pulled from Southwest Airlines's XBRL filings on SEC EDGAR. Italic rows are worked out from the others.
| FY2025 | FY2024 | FY2023 | FY2022 | FY2021 | |
|---|---|---|---|---|---|
| Revenue growth | |||||
| Revenue | $28.1B | $27.5B | $26.1B | $23.8B | $15.8B |
| Change on the year | +2% | +5% | +10% | +51% | — |
| Free cash flow | |||||
| Free cash flow | −$831M | −$1.6B | −$356M | −$134M | $1.8B |
| Of revenue | −3% | −6% | −1% | −1% | 12% |
| Profit margins | |||||
| Operating margin | 1.5% | 1.2% | 0.9% | 4.3% | 10.9% |
| Net margin | 1.6% | 1.7% | 1.8% | 2.3% | 6.2% |
| Debt vs. cash | |||||
| Cash | $3.2B | $7.5B | $9.3B | $9.5B | $12.5B |
| Long-term debt | $4.9B | $6.7B | $8.0B | $8.1B | $10.3B |
| Net cash (debt) | −$1.7B | $812M | $1.3B | $1.4B | $2.2B |
What Southwest Airlines says it does
Company Overview Southwest Airlines Co. (the “Company” or “Southwest”) operates Southwest Airlines, a major passenger airline that provides scheduled air transportation in the United States and near-international markets. Southwest commenced service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities: Dallas, Houston, and San Antonio. Southwest’s unique route network, competitive fares, and famous Hospitality continue to make the Company an attractive choice for Customers in cities across the United States and near-international destinations. As of December 31, 2025, Southwest had a total of 803 Boeing 737 aircraft in its fleet and served 117 destinations in 42 states, the District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. Company Initiatives As…
Risk factors LUV lists in its 10-K
- Based on these reports, the Board may request follow-up information and presentations to address any specific concerns and recommendations
- Additionally, the Audit Committee has opportunities to report regularly to the entire Board and review with the Board any major issues that arise at the committee level, which may include cybersecurity risks
- The Audit Committee reviews with management the Company’s technology and cybersecurity frameworks, policies, programs, opportunities, and risk profile as needed at its regularly scheduled meetings
- Based on these management reports, the Audit Committee may request follow-up information and presentations to address any specific concerns and recommendations
- In addition to this regular reporting, cybersecurity risks or threats may also be escalated on an as-needed basis to the Audit Committee