* Note: Prices are in Million (M) USD.
Description:
Southwest Airlines Co., typically referred to as Southwest, is one of the major airlines of the United States and the world's largest low-cost carrier airline. It is headquartered in Dallas, Texas.
These criteria used Company's Cash, EBITDA and Debt balance to determines its fair value:
Cash : $7,509 M
Debt : $8,058 M
EBITDA : $1,651 M
Net Debt (Debt - Cash): $549 M
Since Net Debt is covered by EBITDA within 1 year, 3 points assigned.
This criteria used industry in which company operates:
Sector: Industrials
Industry: Airlines
Based on industry, 3 points assigned.
This criteria used Company's Price To Earning (P/E) Ratio to determines its fair value:
Forward PE Ratio: 19.17
Since Forward PE Ratio is between 15 - 20, 3 points assigned.
This criteria used Company's ability to convert Sales into free cash flow to determine fair value:
Using last 20 overlapping fiscal years (max 20).Average Free Cash Flow: $681 M
Average Revenue: $16,855 M
Revenue Converted To Free Cash Flow (%): 4.0%
Since Free Cash Flow (FCF) to Revenue percentage is less than 15, 1 point assigned.
This criteria used company's growth potential to calculate its fair value:
Latest Revenue (2024-12-31): $27,483 M
Revenue 4 Years Ago (2020-12-31): $9,048 M
Last 5 Years Average Revenue Growth: 41%
Since Revenue Growth is greater than 20, 5 points assigned.
This criteria used Company's ability to buy back its own share:
Latest Share Count (2024-12-31): $643 M
Share Count 5 Years Ago (2020-12-31): $565 M
Company is not buying back its own shares, 0 points assigned.
This criteria used Company's dividend payout ratio to determine its fair value:
Next Year Earnings Per Share (EPS): $2.37
Trailing 12-Month Earnings Per Share (EPS): $1.07
Average Earnings Per Share (EPS): $1.72
Dividend Per Share (DPS): $1
Payout Ratio: 42%
Dividend Yield: 2%
Since company Payout Ratio is less than 50, 2 points assigned.
Since Dividend Yield is greater than 2, 2 points assigned.
This criteria used Company's Return On Equity (ROE%) to determine its fair value:
Using last 20 valid ROE years (max 20).Average ROE: 10.0%
Since Average ROE is between 10 - 20, 3 points assigned.
This criteria used Company's current price to its 52 week low price to determines its fair value:
Current Price: $33
52-Week Low: $23
Threshold Price (15% Above 52-Week Low): $27
Since Current price is not within 15% threshold, 0 point assigned.
This criteria used Company's Market Cap to determines its fair value:
Market Capitalization: $15,651 M
Since Market Cap is between 10B - 100B, 2 points assigned.
% Exposure to Total Portfolio
Based on the market cap, we recommend do not exceed 3% exposure of Total Portfolio.
Value-Trade has assigned 24 points to above Southwest Airlines Company (LUV) stock.
Heads up: One or more P/E inputs look exaggerated and may skew the blend.
• Growth Based PE
40.00 (>2× median)
Further research is recommended; please use your own due diligence.In such cases, multiplying earnings by the long-run average P/E typically gives a closer, more reliable fair value.
Rule of thumb: Last 17 Years Avg P/E (19.80)
× EPS ($1.72) = $34.06.
Last 17 Years Avg PE 19.8, Fair Value PE 15, Industry Based PE 10, Growth Based PE 40, RCFC Based PE 15.23, ROE Based PE 18.02, Risk-Free Anchored PE (25% MoS) 17.08. Based on these 7 values, average assigned is 19.30. Value-Trades has assined P/E value 19.30. Since an average (Current Year EPS + Next Year EPS) earning per share is $1.72.
The fair value of Southwest Airlines Company (LUV) stock should be (19.30 x $1.72) = $33.2.
