Intrinsic value of Southwest Airlines - LUV

Previous Close

$65.06

  Intrinsic Value

$77.83

stock screener

  Rating & Target

hold

+20%

Previous close

$65.06

 
Intrinsic value

$77.83

 
Up/down potential

+20%

 
Rating

hold

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of LUV stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.05
  2.60
  2.84
  3.06
  3.25
  3.43
  3.58
  3.72
  3.85
  3.97
  4.07
  4.16
  4.25
  4.32
  4.39
  4.45
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.84
  4.86
  4.87
  4.89
Revenue, $m
  20,425
  20,956
  21,551
  22,210
  22,932
  23,717
  24,567
  25,482
  26,464
  27,513
  28,633
  29,825
  31,092
  32,436
  33,860
  35,367
  36,960
  38,644
  40,421
  42,297
  44,275
  46,359
  48,555
  50,868
  53,304
  55,867
  58,564
  61,401
  64,386
  67,524
  70,824
Variable operating expenses, $m
 
  16,595
  17,063
  17,582
  18,150
  18,768
  19,437
  20,158
  20,930
  21,757
  22,638
  23,480
  24,477
  25,535
  26,656
  27,842
  29,097
  30,422
  31,822
  33,298
  34,855
  36,496
  38,225
  40,046
  41,963
  43,981
  46,104
  48,338
  50,688
  53,158
  55,756
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  16,665
  16,595
  17,063
  17,582
  18,150
  18,768
  19,437
  20,158
  20,930
  21,757
  22,638
  23,480
  24,477
  25,535
  26,656
  27,842
  29,097
  30,422
  31,822
  33,298
  34,855
  36,496
  38,225
  40,046
  41,963
  43,981
  46,104
  48,338
  50,688
  53,158
  55,756
Operating income, $m
  3,760
  4,361
  4,488
  4,628
  4,782
  4,949
  5,130
  5,324
  5,533
  5,756
  5,995
  6,345
  6,615
  6,901
  7,204
  7,524
  7,863
  8,221
  8,600
  8,999
  9,419
  9,863
  10,330
  10,822
  11,340
  11,886
  12,459
  13,063
  13,698
  14,366
  15,068
EBITDA, $m
  4,981
  5,645
  5,805
  5,983
  6,177
  6,389
  6,618
  6,864
  7,128
  7,411
  7,713
  8,034
  8,375
  8,737
  9,121
  9,527
  9,956
  10,409
  10,888
  11,394
  11,926
  12,488
  13,079
  13,702
  14,358
  15,049
  15,775
  16,540
  17,344
  18,189
  19,078
Interest expense (income), $m
  100
  103
  116
  131
  147
  165
  184
  205
  227
  251
  277
  304
  334
  365
  398
  432
  469
  508
  550
  593
  639
  687
  739
  792
  849
  909
  971
  1,037
  1,107
  1,180
  1,257
Earnings before tax, $m
  3,547
  4,258
  4,372
  4,497
  4,635
  4,784
  4,946
  5,119
  5,306
  5,505
  5,718
  6,041
  6,281
  6,536
  6,806
  7,092
  7,394
  7,713
  8,050
  8,406
  8,780
  9,175
  9,592
  10,030
  10,491
  10,977
  11,488
  12,026
  12,591
  13,186
  13,811
Tax expense, $m
  1,303
  1,150
  1,180
  1,214
  1,251
  1,292
  1,335
  1,382
  1,433
  1,486
  1,544
  1,631
  1,696
  1,765
  1,838
  1,915
  1,996
  2,083
  2,174
  2,269
  2,371
  2,477
  2,590
  2,708
  2,833
  2,964
  3,102
  3,247
  3,400
  3,560
  3,729
Net income, $m
  2,244
  3,109
  3,191
  3,283
  3,383
  3,492
  3,610
  3,737
  3,873
  4,019
  4,174
  4,410
  4,585
  4,771
  4,968
  5,177
  5,398
  5,631
  5,877
  6,136
  6,410
  6,698
  7,002
  7,322
  7,659
  8,013
  8,386
  8,779
  9,192
  9,626
  10,082

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,305
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  23,286
  20,505
  21,087
  21,732
  22,438
  23,207
  24,038
  24,933
  25,894
  26,921
  28,017
  29,183
  30,423
  31,737
  33,131
  34,605
  36,165
  37,812
  39,551
  41,386
  43,322
  45,361
  47,510
  49,773
  52,156
  54,664
  57,303
  60,079
  63,000
  66,070
  69,299
Adjusted assets (=assets-cash), $m
  19,981
  20,505
  21,087
  21,732
  22,438
  23,207
  24,038
  24,933
  25,894
  26,921
  28,017
  29,183
  30,423
  31,737
  33,131
  34,605
  36,165
  37,812
  39,551
  41,386
  43,322
  45,361
  47,510
  49,773
  52,156
  54,664
  57,303
  60,079
  63,000
  66,070
  69,299
Revenue / Adjusted assets
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
  1.022
Average production assets, $m
  16,768
  17,205
  17,694
  18,234
  18,827
  19,472
  20,169
  20,921
  21,727
  22,588
  23,508
  24,487
  25,526
  26,630
  27,799
  29,036
  30,344
  31,727
  33,186
  34,726
  36,349
  38,061
  39,864
  41,763
  43,762
  45,867
  48,081
  50,410
  52,861
  55,437
  58,146
Working capital, $m
  -2,346
  -5,218
  -5,366
  -5,530
  -5,710
  -5,906
  -6,117
  -6,345
  -6,589
  -6,851
  -7,130
  -7,426
  -7,742
  -8,076
  -8,431
  -8,806
  -9,203
  -9,622
  -10,065
  -10,532
  -11,024
  -11,543
  -12,090
  -12,666
  -13,273
  -13,911
  -14,582
  -15,289
  -16,032
  -16,813
  -17,635
Total debt, $m
  3,512
  3,328
  3,744
  4,205
  4,710
  5,260
  5,854
  6,494
  7,181
  7,916
  8,699
  9,533
  10,419
  11,359
  12,355
  13,410
  14,525
  15,703
  16,946
  18,258
  19,642
  21,100
  22,637
  24,255
  25,959
  27,752
  29,639
  31,624
  33,712
  35,907
  38,216
Total liabilities, $m
  14,845
  14,661
  15,077
  15,538
  16,043
  16,593
  17,187
  17,827
  18,514
  19,249
  20,032
  20,866
  21,752
  22,692
  23,688
  24,743
  25,858
  27,036
  28,279
  29,591
  30,975
  32,433
  33,970
  35,588
  37,292
  39,085
  40,972
  42,957
  45,045
  47,240
  49,549
Total equity, $m
  8,441
  5,844
  6,010
  6,194
  6,395
  6,614
  6,851
  7,106
  7,380
  7,673
  7,985
  8,317
  8,670
  9,045
  9,442
  9,863
  10,307
  10,776
  11,272
  11,795
  12,347
  12,928
  13,540
  14,185
  14,865
  15,579
  16,331
  17,123
  17,955
  18,830
  19,750
Total liabilities and equity, $m
  23,286
  20,505
  21,087
  21,732
  22,438
  23,207
  24,038
  24,933
  25,894
  26,922
  28,017
  29,183
  30,422
  31,737
  33,130
  34,606
  36,165
  37,812
  39,551
  41,386
  43,322
  45,361
  47,510
  49,773
  52,157
  54,664
  57,303
  60,080
  63,000
  66,070
  69,299
Debt-to-equity ratio
  0.416
  0.570
  0.620
  0.680
  0.740
  0.800
  0.850
  0.910
  0.970
  1.030
  1.090
  1.150
  1.200
  1.260
  1.310
  1.360
  1.410
  1.460
  1.500
  1.550
  1.590
  1.630
  1.670
  1.710
  1.750
  1.780
  1.810
  1.850
  1.880
  1.910
  1.930
Adjusted equity ratio
  0.257
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,244
  3,109
  3,191
  3,283
  3,383
  3,492
  3,610
  3,737
  3,873
  4,019
  4,174
  4,410
  4,585
  4,771
  4,968
  5,177
  5,398
  5,631
  5,877
  6,136
  6,410
  6,698
  7,002
  7,322
  7,659
  8,013
  8,386
  8,779
  9,192
  9,626
  10,082
Depreciation, amort., depletion, $m
  1,221
  1,284
  1,317
  1,355
  1,395
  1,440
  1,488
  1,540
  1,595
  1,655
  1,718
  1,689
  1,760
  1,837
  1,917
  2,002
  2,093
  2,188
  2,289
  2,395
  2,507
  2,625
  2,749
  2,880
  3,018
  3,163
  3,316
  3,477
  3,646
  3,823
  4,010
Funds from operations, $m
  4,310
  4,392
  4,508
  4,637
  4,779
  4,932
  5,098
  5,277
  5,469
  5,674
  5,892
  6,099
  6,346
  6,608
  6,886
  7,179
  7,490
  7,819
  8,165
  8,531
  8,917
  9,323
  9,751
  10,202
  10,677
  11,176
  11,702
  12,255
  12,837
  13,449
  14,092
Change in working capital, $m
  17
  -132
  -148
  -164
  -180
  -196
  -212
  -228
  -244
  -261
  -279
  -297
  -315
  -335
  -355
  -375
  -397
  -419
  -443
  -467
  -492
  -519
  -547
  -576
  -606
  -638
  -672
  -707
  -743
  -781
  -822
Cash from operations, $m
  4,293
  4,524
  4,657
  4,801
  4,958
  5,128
  5,310
  5,505
  5,713
  5,935
  6,171
  6,395
  6,661
  6,942
  7,240
  7,555
  7,887
  8,238
  8,608
  8,998
  9,409
  9,842
  10,298
  10,778
  11,283
  11,815
  12,374
  12,962
  13,580
  14,230
  14,914
Maintenance CAPEX, $m
  0
  -1,156
  -1,187
  -1,220
  -1,258
  -1,298
  -1,343
  -1,391
  -1,443
  -1,498
  -1,558
  -1,621
  -1,689
  -1,760
  -1,837
  -1,917
  -2,002
  -2,093
  -2,188
  -2,289
  -2,395
  -2,507
  -2,625
  -2,749
  -2,880
  -3,018
  -3,163
  -3,316
  -3,477
  -3,646
  -3,823
New CAPEX, $m
  -2,147
  -437
  -489
  -541
  -593
  -645
  -698
  -751
  -806
  -862
  -919
  -979
  -1,040
  -1,103
  -1,169
  -1,237
  -1,308
  -1,382
  -1,459
  -1,540
  -1,624
  -1,711
  -1,803
  -1,899
  -1,999
  -2,104
  -2,214
  -2,329
  -2,450
  -2,577
  -2,709
Cash from investing activities, $m
  -2,272
  -1,593
  -1,676
  -1,761
  -1,851
  -1,943
  -2,041
  -2,142
  -2,249
  -2,360
  -2,477
  -2,600
  -2,729
  -2,863
  -3,006
  -3,154
  -3,310
  -3,475
  -3,647
  -3,829
  -4,019
  -4,218
  -4,428
  -4,648
  -4,879
  -5,122
  -5,377
  -5,645
  -5,927
  -6,223
  -6,532
Free cash flow, $m
  2,021
  2,931
  2,981
  3,040
  3,108
  3,184
  3,269
  3,363
  3,464
  3,575
  3,694
  3,795
  3,932
  4,079
  4,235
  4,400
  4,576
  4,763
  4,960
  5,169
  5,390
  5,624
  5,870
  6,130
  6,404
  6,692
  6,996
  7,316
  7,653
  8,008
  8,381
Issuance/(repayment) of debt, $m
  -76
  382
  416
  461
  505
  550
  594
  640
  687
  734
  783
  834
  886
  940
  996
  1,054
  1,115
  1,178
  1,244
  1,312
  1,384
  1,458
  1,536
  1,618
  1,704
  1,793
  1,887
  1,985
  2,088
  2,196
  2,309
Issuance/(repurchase) of shares, $m
  -1,721
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,702
  382
  416
  461
  505
  550
  594
  640
  687
  734
  783
  834
  886
  940
  996
  1,054
  1,115
  1,178
  1,244
  1,312
  1,384
  1,458
  1,536
  1,618
  1,704
  1,793
  1,887
  1,985
  2,088
  2,196
  2,309
Total cash flow (excl. dividends), $m
  319
  3,313
  3,398
  3,501
  3,613
  3,734
  3,864
  4,003
  4,151
  4,309
  4,477
  4,629
  4,819
  5,019
  5,231
  5,455
  5,691
  5,941
  6,204
  6,482
  6,774
  7,082
  7,406
  7,748
  8,107
  8,485
  8,883
  9,301
  9,741
  10,204
  10,690
Retained Cash Flow (-), $m
  -1,083
  -142
  -166
  -184
  -201
  -219
  -237
  -255
  -274
  -293
  -312
  -332
  -353
  -375
  -397
  -420
  -444
  -470
  -496
  -523
  -552
  -581
  -612
  -645
  -679
  -715
  -752
  -791
  -832
  -875
  -920
Prev. year cash balance distribution, $m
 
  2,739
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  5,910
  3,232
  3,318
  3,412
  3,515
  3,627
  3,748
  3,877
  4,016
  4,165
  4,297
  4,465
  4,644
  4,834
  5,034
  5,247
  5,471
  5,708
  5,959
  6,222
  6,501
  6,794
  7,103
  7,428
  7,771
  8,131
  8,510
  8,909
  9,329
  9,770
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  5,666
  2,959
  2,887
  2,809
  2,725
  2,632
  2,532
  2,423
  2,307
  2,183
  2,041
  1,906
  1,766
  1,623
  1,478
  1,333
  1,190
  1,051
  917
  791
  672
  564
  466
  378
  302
  237
  183
  138
  102
  74
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Southwest Airlines Co. (Southwest) operates Southwest Airlines, a passenger airline that provides scheduled air transportation in the United States and near-international markets. The Company provides point-to-point service. The Company offers ancillary service offerings, such as Southwest's EarlyBird Check-In and transportation of pets and unaccompanied minors, in accordance with Southwest's respective policies. Southwest's Rapid Rewards frequent flyer program enables program members (Members) to earn points for every dollar spent on Southwest fares. Its Internet Website, Southwest.com, is an avenue for Southwest customers to purchase and manage travel online. As of December 31, 2016, Southwest operated a total of 723 Boeing 737 aircraft and served 101 destinations in 40 states, the District of Columbia, the Commonwealth of Puerto Rico, and eight near-international countries: Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, and Cuba.

FINANCIAL RATIOS  of  Southwest Airlines (LUV)

Valuation Ratios
P/E Ratio 18.8
Price to Sales 2.1
Price to Book 5
Price to Tangible Book
Price to Cash Flow 9.8
Price to Free Cash Flow 19.6
Growth Rates
Sales Growth Rate 3.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0.2%
Cap. Spend. - 3 Yr. Gr. Rate 8.2%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 34.9%
Total Debt to Equity 41.6%
Interest Coverage 36
Management Effectiveness
Return On Assets 10.3%
Ret/ On Assets - 3 Yr. Avg. 9.2%
Return On Total Capital 19.8%
Ret/ On T. Cap. - 3 Yr. Avg. 17.5%
Return On Equity 28.4%
Return On Equity - 3 Yr. Avg. 25.1%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 69.1%
Gross Margin - 3 Yr. Avg. 65.9%
EBITDA Margin 23.8%
EBITDA Margin - 3 Yr. Avg. 20.8%
Operating Margin 18.4%
Oper. Margin - 3 Yr. Avg. 17%
Pre-Tax Margin 17.4%
Pre-Tax Margin - 3 Yr. Avg. 14.9%
Net Profit Margin 11%
Net Profit Margin - 3 Yr. Avg. 9.4%
Effective Tax Rate 36.7%
Eff/ Tax Rate - 3 Yr. Avg. 37.2%
Payout Ratio 9.9%

LUV stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LUV stock intrinsic value calculation we used $20425 million for the last fiscal year's total revenue generated by Southwest Airlines. The default revenue input number comes from 2016 income statement of Southwest Airlines. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our LUV stock valuation model: a) initial revenue growth rate of 2.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for LUV is calculated based on our internal credit rating of Southwest Airlines, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Southwest Airlines.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of LUV stock the variable cost ratio is equal to 79.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for LUV stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Southwest Airlines.

Corporate tax rate of 27% is the nominal tax rate for Southwest Airlines. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the LUV stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for LUV are equal to 82.1%.

Life of production assets of 14.5 years is the average useful life of capital assets used in Southwest Airlines operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for LUV is equal to -24.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $8441 million for Southwest Airlines - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 597.25 million for Southwest Airlines is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Southwest Airlines at the current share price and the inputted number of shares is $38.9 billion.

RELATED COMPANIES Price Int.Val. Rating
JBLU JetBlue Airway 22.48 45.73  str.buy
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ALGT Allegiant Trav 166.95 306.19  str.buy
AAL American Airli 58.34 40.24  sell
DAL Delta Air Line 59.45 234.52  str.buy
UAL United Contine 76.30 200.08  str.buy
ALK Alaska Air Gro 69.79 940.30  str.buy
SKYW Skywest 53.85 17.60  str.sell
HA Hawaiian Holdi 38.15 125.64  str.buy

COMPANY NEWS

▶ American Airlines: Analysts Views before 4Q17   [Jan-19-18 01:10PM  Market Realist]
▶ Icy weather still impacting Houston flights; United, Southwest waive rebooking fees   [Jan-17-18 04:05PM  American City Business Journals]
▶ Midway Airport bracing for extended lane closures on key access road   [03:55PM  American City Business Journals]
▶ Stocks With Rising Relative Strength: Southwest Airlines   [03:00AM  Investor's Business Daily]
▶ Southwest Airlines sues startup over airfare drop alerts   [Jan-16-18 04:50PM  American City Business Journals]
▶ Boeing Co Stock Is Flying Too High to Benefit New Investors   [Jan-12-18 12:56PM  InvestorPlace]
▶ These airlines respond to your Twitter rants and raves the fastest   [Jan-11-18 04:10PM  American City Business Journals]
▶ Yahoo Finance Live: Market Movers - Jan 11th, 2018   [07:20AM  Yahoo Finance Video]
▶ Delta Air Lines tops in December on-time derby despite big power outage   [04:41PM  American City Business Journals]
▶ Massive airport delays put federal rule in focus   [Jan-09-18 07:24PM  Associated Press]
▶ Tampa International's newest West Coast flight takes off   [10:41AM  American City Business Journals]
▶ 3 Stocks That Turned $7,000 Into $55,000   [07:45AM  Motley Fool]
▶ Alaska Air Group awards $1,000 bonuses to workers after Trump tax cut   [12:15AM  American City Business Journals]
▶ Winter storm hits Tampa flights   [03:30PM  American City Business Journals]
▶ 'Bomb cyclone' slams U.S., grounds flights at JFK, LaGuardia and Newark   [10:30AM  American City Business Journals]
▶ Company News For January 4, 2018   [09:58AM  Zacks]
▶ Delta Air Lines shines in new punctuality study   [Jan-03-18 04:25PM  American City Business Journals]
▶ Delta Air Lines shines in new punctuality study   [01:45PM  American City Business Journals]
▶ Pedestrian bridge opens connecting Southwest Airlines headquarters   [07:30AM  American City Business Journals]
▶ Spirit Airlines Stock on the Rise Again   [Jan-01-18 07:31AM  Market Realist]
▶ This No. 1-Ranked Leisure Stock May Be Planning A New Breakout   [Dec-29-17 04:05PM  Investor's Business Daily]
▶ Vetr Upgrades Southwest, But Remains Mostly Bearish   [Dec-27-17 03:37PM  Benzinga]
▶ United Airlines at the epicenter in a volatile 2017 for airlines   [01:45PM  American City Business Journals]
▶ How Has Southwest Airlines Stock Fared?   [09:01AM  Market Realist]
▶ Southwest Airlines Raises Its 4Q17 Guidance   [07:32AM  Market Realist]
Financial statements of LUV
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