Southwest Airlines Co. (LUV) Valuation

Valuation

Model-based estimates, not advice. The DCF is the discounted-cash-flow value per share; compare it with the price, not as a target.

DCF fair value

-116.4%

-$7.24

vs $44.09 price

Levered DCF

-$4.70

After debt service

Piotroski score

7 / 9

Strong

Altman Z-score

2.24

Grey zone

Rating

B-

Overall 3 / 5

Ratios by fiscal year

Margins and yields are shares of revenue, equity or price; multiples are ×.

Metric	FY2025	FY2024	FY2023	FY2022	FY2021	FY2020	FY2019	FY2018
P/E	50.4×	41.51×	35.65×	37×	25.96×	-8.57×	12.61×	10.81×
P/B	2.8×	1.94×	1.63×	1.87×	2.44×	2.97×	2.95×	2.7×
P/S	0.8×	0.73×	0.66×	0.84×	1.61×	2.91×	1.29×	1.21×
EV / EBITDA	11.39×	8.37×	7.15×	8.38×	8.31×	-10.22×	7.16×	6.32×
Gross margin	17.4%	16.2%	16.2%	20.0%	26.1%	-20.9%	26.7%	27.6%
Operating margin	1.5%	1.2%	0.9%	4.3%	10.9%	-42.2%	13.2%	14.6%
Net margin	1.6%	1.7%	1.8%	2.3%	6.2%	-34.0%	10.3%	11.2%
Current ratio	0.52×	0.92×	1.14×	1.43×	1.97×	2.02×	0.67×	0.64×
Debt / equity	0.75×	0.78×	0.87×	0.89×	1.18×	1.37×	0.41×	0.34×
Interest coverage	3.79×	1.5×	0.95×	3.38×	3.99×	-12.15×	36.06×	34.47×
Dividend yield	1.8%	2.1%	2.5%	0.0%	0.0%	0.7%	1.3%	1.2%
Payout ratio	90.5%	92.5%	92.0%	0.0%	0.0%	-6.1%	16.2%	13.5%

Key metrics by fiscal year

Metric	FY2025	FY2024	FY2023	FY2022	FY2021	FY2020	FY2019	FY2018
Return on equity	5.5%	4.5%	4.4%	5.0%	9.4%	-34.6%	23.4%	25.0%
Return on invested capital	1.8%	1.1%	0.7%	3.0%	4.6%	-10.0%	12.7%	13.2%
Return on assets	1.5%	1.4%	1.3%	1.5%	2.7%	-8.9%	8.9%	9.4%
Free cash flow yield	-3.7%	-8.0%	-2.1%	-0.8%	7.1%	-6.2%	10.2%	11.0%
Earnings yield	2.0%	2.3%	2.7%	2.7%	3.9%	-11.7%	7.9%	9.3%
Enterprise value	$25.5B	$20.7B	$17.1B	$19.9B	$25.2B	$27.5B	$30.5B	$28.2B
Net debt / EBITDA	1.41×	0.22×	-0.04×	-0.01×	-0.07×	-0.42×	0.34×	0.34×
Cash conversion cycle (days)	21	22	25	26	43	56	23	14