Intrinsic value of Southwest Airlines - LUV

Previous Close

$59.52

  Intrinsic Value

$57.59

stock screener

  Rating & Target

hold

-3%

Previous close

$59.52

 
Intrinsic value

$57.59

 
Up/down potential

-3%

 
Rating

hold

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

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 35.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
  4.92
  4.93
  4.94
Revenue, $m
  21,954
  22,795
  23,695
  24,655
  25,678
  26,764
  27,918
  29,140
  30,434
  31,802
  33,248
  34,775
  36,386
  38,085
  39,876
  41,763
  43,751
  45,843
  48,046
  50,364
  52,803
  55,368
  58,065
  60,902
  63,884
  67,018
  70,313
  73,775
  77,414
  81,237
Variable operating expenses, $m
  17,911
  18,593
  19,323
  20,103
  20,932
  21,814
  22,750
  23,742
  24,792
  25,902
  26,978
  28,217
  29,524
  30,903
  32,356
  33,887
  35,500
  37,198
  38,986
  40,866
  42,845
  44,926
  47,115
  49,417
  51,836
  54,380
  57,053
  59,863
  62,815
  65,917
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
  17,911
  18,593
  19,323
  20,103
  20,932
  21,814
  22,750
  23,742
  24,792
  25,902
  26,978
  28,217
  29,524
  30,903
  32,356
  33,887
  35,500
  37,198
  38,986
  40,866
  42,845
  44,926
  47,115
  49,417
  51,836
  54,380
  57,053
  59,863
  62,815
  65,917
Operating income, $m
  4,043
  4,202
  4,371
  4,553
  4,745
  4,950
  5,168
  5,398
  5,642
  5,900
  6,270
  6,558
  6,862
  7,182
  7,520
  7,876
  8,251
  8,645
  9,061
  9,498
  9,958
  10,441
  10,950
  11,485
  12,047
  12,638
  13,260
  13,913
  14,599
  15,320
EBITDA, $m
  6,085
  6,318
  6,568
  6,834
  7,117
  7,419
  7,738
  8,077
  8,436
  8,815
  9,216
  9,639
  10,086
  10,557
  11,053
  11,576
  12,127
  12,707
  13,318
  13,960
  14,636
  15,347
  16,095
  16,881
  17,707
  18,576
  19,489
  20,449
  21,458
  22,517
Interest expense (income), $m
  100
  198
  228
  260
  293
  329
  368
  408
  452
  497
  546
  597
  651
  708
  769
  833
  900
  970
  1,045
  1,123
  1,206
  1,293
  1,384
  1,480
  1,581
  1,688
  1,799
  1,917
  2,040
  2,170
  2,306
Earnings before tax, $m
  3,845
  3,974
  4,112
  4,259
  4,416
  4,583
  4,759
  4,947
  5,145
  5,355
  5,673
  5,907
  6,153
  6,413
  6,687
  6,976
  7,280
  7,600
  7,937
  8,292
  8,665
  9,057
  9,470
  9,904
  10,360
  10,839
  11,343
  11,872
  12,429
  13,014
Tax expense, $m
  1,038
  1,073
  1,110
  1,150
  1,192
  1,237
  1,285
  1,336
  1,389
  1,446
  1,532
  1,595
  1,661
  1,732
  1,806
  1,884
  1,966
  2,052
  2,143
  2,239
  2,340
  2,445
  2,557
  2,674
  2,797
  2,927
  3,063
  3,206
  3,356
  3,514
Net income, $m
  2,807
  2,901
  3,002
  3,109
  3,224
  3,345
  3,474
  3,611
  3,756
  3,909
  4,141
  4,312
  4,492
  4,682
  4,882
  5,093
  5,315
  5,548
  5,794
  6,053
  6,325
  6,612
  6,913
  7,230
  7,563
  7,913
  8,280
  8,667
  9,073
  9,500

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  26,043
  27,041
  28,108
  29,247
  30,460
  31,749
  33,117
  34,567
  36,102
  37,725
  39,440
  41,251
  43,163
  45,178
  47,303
  49,541
  51,899
  54,381
  56,994
  59,744
  62,637
  65,679
  68,879
  72,244
  75,781
  79,500
  83,408
  87,515
  91,831
  96,367
Adjusted assets (=assets-cash), $m
  26,043
  27,041
  28,108
  29,247
  30,460
  31,749
  33,117
  34,567
  36,102
  37,725
  39,440
  41,251
  43,163
  45,178
  47,303
  49,541
  51,899
  54,381
  56,994
  59,744
  62,637
  65,679
  68,879
  72,244
  75,781
  79,500
  83,408
  87,515
  91,831
  96,367
Revenue / Adjusted assets
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
Average production assets, $m
  19,452
  20,197
  20,994
  21,844
  22,750
  23,713
  24,735
  25,818
  26,964
  28,177
  29,458
  30,811
  32,238
  33,743
  35,330
  37,002
  38,763
  40,617
  42,569
  44,623
  46,783
  49,056
  51,446
  53,959
  56,601
  59,378
  62,297
  65,365
  68,589
  71,976
Working capital, $m
  -944
  -980
  -1,019
  -1,060
  -1,104
  -1,151
  -1,200
  -1,253
  -1,309
  -1,367
  -1,430
  -1,495
  -1,565
  -1,638
  -1,715
  -1,796
  -1,881
  -1,971
  -2,066
  -2,166
  -2,271
  -2,381
  -2,497
  -2,619
  -2,747
  -2,882
  -3,023
  -3,172
  -3,329
  -3,493
Total debt, $m
  4,223
  4,807
  5,431
  6,097
  6,807
  7,561
  8,361
  9,210
  10,108
  11,057
  12,061
  13,120
  14,238
  15,417
  16,660
  17,970
  19,349
  20,801
  22,330
  23,938
  25,630
  27,410
  29,282
  31,251
  33,320
  35,495
  37,782
  40,184
  42,709
  45,362
Total liabilities, $m
  15,235
  15,819
  16,443
  17,109
  17,819
  18,573
  19,373
  20,222
  21,120
  22,069
  23,073
  24,132
  25,250
  26,429
  27,672
  28,982
  30,361
  31,813
  33,342
  34,950
  36,642
  38,422
  40,294
  42,263
  44,332
  46,507
  48,794
  51,196
  53,721
  56,374
Total equity, $m
  10,808
  11,222
  11,665
  12,137
  12,641
  13,176
  13,744
  14,345
  14,982
  15,656
  16,368
  17,119
  17,912
  18,749
  19,631
  20,560
  21,538
  22,568
  23,653
  24,794
  25,994
  27,257
  28,585
  29,981
  31,449
  32,992
  34,614
  36,319
  38,110
  39,992
Total liabilities and equity, $m
  26,043
  27,041
  28,108
  29,246
  30,460
  31,749
  33,117
  34,567
  36,102
  37,725
  39,441
  41,251
  43,162
  45,178
  47,303
  49,542
  51,899
  54,381
  56,995
  59,744
  62,636
  65,679
  68,879
  72,244
  75,781
  79,499
  83,408
  87,515
  91,831
  96,366
Debt-to-equity ratio
  0.390
  0.430
  0.470
  0.500
  0.540
  0.570
  0.610
  0.640
  0.670
  0.710
  0.740
  0.770
  0.790
  0.820
  0.850
  0.870
  0.900
  0.920
  0.940
  0.970
  0.990
  1.010
  1.020
  1.040
  1.060
  1.080
  1.090
  1.110
  1.120
  1.130
Adjusted equity ratio
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415
  0.415

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,807
  2,901
  3,002
  3,109
  3,224
  3,345
  3,474
  3,611
  3,756
  3,909
  4,141
  4,312
  4,492
  4,682
  4,882
  5,093
  5,315
  5,548
  5,794
  6,053
  6,325
  6,612
  6,913
  7,230
  7,563
  7,913
  8,280
  8,667
  9,073
  9,500
Depreciation, amort., depletion, $m
  2,042
  2,117
  2,196
  2,281
  2,372
  2,468
  2,571
  2,679
  2,793
  2,915
  2,946
  3,081
  3,224
  3,374
  3,533
  3,700
  3,876
  4,062
  4,257
  4,462
  4,678
  4,906
  5,145
  5,396
  5,660
  5,938
  6,230
  6,536
  6,859
  7,198
Funds from operations, $m
  4,849
  5,017
  5,198
  5,391
  5,596
  5,814
  6,045
  6,290
  6,549
  6,823
  7,087
  7,393
  7,716
  8,056
  8,415
  8,793
  9,191
  9,610
  10,051
  10,515
  11,004
  11,517
  12,058
  12,626
  13,223
  13,850
  14,510
  15,203
  15,932
  16,697
Change in working capital, $m
  -34
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -90
  -95
  -100
  -105
  -110
  -116
  -122
  -128
  -135
  -142
  -149
  -156
  -164
Cash from operations, $m
  4,883
  5,054
  5,237
  5,432
  5,640
  5,860
  6,094
  6,342
  6,605
  6,882
  7,149
  7,459
  7,785
  8,129
  8,492
  8,874
  9,276
  9,700
  10,146
  10,615
  11,109
  11,628
  12,174
  12,748
  13,351
  13,985
  14,652
  15,352
  16,088
  16,862
Maintenance CAPEX, $m
  -1,876
  -1,945
  -2,020
  -2,099
  -2,184
  -2,275
  -2,371
  -2,474
  -2,582
  -2,696
  -2,818
  -2,946
  -3,081
  -3,224
  -3,374
  -3,533
  -3,700
  -3,876
  -4,062
  -4,257
  -4,462
  -4,678
  -4,906
  -5,145
  -5,396
  -5,660
  -5,938
  -6,230
  -6,536
  -6,859
New CAPEX, $m
  -690
  -745
  -797
  -851
  -906
  -963
  -1,022
  -1,083
  -1,146
  -1,212
  -1,281
  -1,353
  -1,427
  -1,505
  -1,587
  -1,672
  -1,761
  -1,854
  -1,952
  -2,054
  -2,161
  -2,273
  -2,390
  -2,513
  -2,642
  -2,777
  -2,919
  -3,068
  -3,224
  -3,387
Cash from investing activities, $m
  -2,566
  -2,690
  -2,817
  -2,950
  -3,090
  -3,238
  -3,393
  -3,557
  -3,728
  -3,908
  -4,099
  -4,299
  -4,508
  -4,729
  -4,961
  -5,205
  -5,461
  -5,730
  -6,014
  -6,311
  -6,623
  -6,951
  -7,296
  -7,658
  -8,038
  -8,437
  -8,857
  -9,298
  -9,760
  -10,246
Free cash flow, $m
  2,317
  2,363
  2,420
  2,482
  2,549
  2,623
  2,701
  2,786
  2,877
  2,973
  3,050
  3,160
  3,276
  3,400
  3,531
  3,669
  3,815
  3,970
  4,133
  4,304
  4,486
  4,677
  4,878
  5,090
  5,313
  5,548
  5,795
  6,055
  6,328
  6,616
Issuance/(repayment) of debt, $m
  555
  584
  624
  666
  710
  754
  800
  848
  898
  950
  1,003
  1,060
  1,118
  1,179
  1,243
  1,310
  1,379
  1,452
  1,529
  1,609
  1,692
  1,780
  1,872
  1,968
  2,069
  2,175
  2,286
  2,403
  2,525
  2,653
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  555
  584
  624
  666
  710
  754
  800
  848
  898
  950
  1,003
  1,060
  1,118
  1,179
  1,243
  1,310
  1,379
  1,452
  1,529
  1,609
  1,692
  1,780
  1,872
  1,968
  2,069
  2,175
  2,286
  2,403
  2,525
  2,653
Total cash flow (excl. dividends), $m
  2,872
  2,947
  3,044
  3,148
  3,259
  3,377
  3,502
  3,634
  3,775
  3,923
  4,054
  4,220
  4,394
  4,579
  4,774
  4,979
  5,194
  5,422
  5,661
  5,913
  6,178
  6,457
  6,750
  7,058
  7,382
  7,723
  8,081
  8,458
  8,853
  9,269
Retained Cash Flow (-), $m
  -378
  -414
  -443
  -473
  -503
  -535
  -568
  -602
  -637
  -674
  -712
  -752
  -793
  -836
  -882
  -929
  -978
  -1,030
  -1,084
  -1,141
  -1,200
  -1,263
  -1,328
  -1,396
  -1,468
  -1,543
  -1,622
  -1,705
  -1,791
  -1,882
Prev. year cash balance distribution, $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 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
  2,494
  2,533
  2,601
  2,675
  2,756
  2,842
  2,934
  3,033
  3,138
  3,249
  3,342
  3,468
  3,601
  3,743
  3,892
  4,050
  4,216
  4,392
  4,577
  4,772
  4,978
  5,194
  5,422
  5,662
  5,914
  6,180
  6,459
  6,753
  7,062
  7,387
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
  2,391
  2,319
  2,264
  2,203
  2,136
  2,062
  1,982
  1,895
  1,802
  1,704
  1,587
  1,480
  1,369
  1,256
  1,143
  1,029
  917
  809
  705
  606
  515
  431
  355
  288
  230
  180
  139
  104
  77
  56
Current shareholders' claim on cash, %
  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 17.2
Price to Sales 1.9
Price to Book 4.6
Price to Tangible Book
Price to Cash Flow 9
Price to Free Cash Flow 18
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 $21171 million for the last fiscal year's total revenue generated by Southwest Airlines. The default revenue input number comes from 2017 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 3.7% 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 81.6%.

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 5.4% 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 88.6%.

Life of production assets of 10 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 -4.3%. 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 - $10430 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 593 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 $35.3 billion.

RELATED COMPANIES Price Int.Val. Rating
JBLU JetBlue Airway 18.66 30.40  str.buy
SAVE Spirit Airline 43.90 89.87  str.buy
ALGT Allegiant Trav 135.70 292.53  str.buy
AAL American Airli 38.16 68.36  buy
DAL Delta Air Line 55.45 123.17  str.buy
UAL United Contine 81.90 118.31  str.buy
ALK Alaska Air Gro 64.31 542.76  str.buy
SKYW Skywest 61.50 8.43  str.sell
HA Hawaiian Holdi 42.50 147.56  str.buy

COMPANY NEWS

▶ Raleigh-Durham International Airport now plans to expand Terminal 1 by 2020   [Aug-16-18 02:19PM  American City Business Journals]
▶ RANKED: The US airlines most often guilty of mishandling baggage   [08:12AM  American City Business Journals]
▶ 3 Airline Stocks Ready to Take Off   [06:00AM  Investopedia]
▶ Top Stocks Warren Buffett Is Buying Now   [Aug-15-18 05:11PM  Motley Fool]
▶ Redfin Reports Housing Market Troubles   [12:38PM  Motley Fool]
▶ Berkshire buys Southwest, sells American shares. But don't read into it   [07:29AM  American City Business Journals]
▶ Southwest Airlines not horsing around with new service-animals policies   [02:34PM  American City Business Journals]
▶ North entrance to Love Field Airport considered by Dallas officials   [01:09PM  American City Business Journals]
▶ Southwest Airlines suddenly grounds scores of planes due to aircraft weight issues   [Aug-13-18 03:46PM  American City Business Journals]
▶ Report: The U.S. airlines most often guilty of mishandling baggage   [03:30PM  American City Business Journals]
▶ Why Southwest Airlines Stock Soared 14% in July   [Aug-10-18 08:59PM  Motley Fool]
▶ Report shows the 'Southwest effect' at Tampa International Airport   [Aug-09-18 04:13PM  American City Business Journals]
▶ 15 Stocks to Buy Ahead of the Fall Season   [03:12PM  InvestorPlace]
▶ These U.S. airlines lead in customer complaints: SLIDESHOW   [06:24AM  American City Business Journals]
▶ Southwest Airlines Reports July Traffic   [06:30AM  PR Newswire]
▶ Report: These U.S. airlines lead the pack for customer complaints   [03:46PM  American City Business Journals]
▶ Delta Air Lines tops in on-time derby in difficult July   [02:14PM  American City Business Journals]
▶ Why Delta added Detroit to its destinations from San Jose   [05:43PM  American City Business Journals]
▶ How Southwest Airlines affects airfares nationwide   [06:55AM  American City Business Journals]
▶ American, Southwest and United pilots agree: No one-pilot cockpits   [Aug-01-18 03:34PM  American City Business Journals]
▶ Peanuts-less Southwest Airlines leaves speculators guessing what's next   [02:53PM  American City Business Journals]
▶ How Southwest Airlines (still) affects airfares nationwide   [01:40PM  American City Business Journals]
▶ 'Repositioning' at RDU could create a budget terminal   [08:32AM  American City Business Journals]
▶ Southwest passengers won't hear onboard credit-card pitch   [Jul-27-18 01:21PM  American City Business Journals]
▶ [$$] Higher Fuel Costs Hit Airlines   [Jul-26-18 07:50PM  The Wall Street Journal]
▶ [$$] Higher Fuel Costs Hit Airlines   [07:03PM  The Wall Street Journal]
▶ Southwest says fatal accident had a $100M impact   [12:16PM  American City Business Journals]
▶ [$$] Southwest's Profit Falls on Weaker Bookings   [07:52AM  The Wall Street Journal]
▶ Southwest Reports Second Quarter Profit   [06:30AM  PR Newswire]
▶ Frontier leads national airlines for consumer complaints   [Jul-25-18 04:46PM  American City Business Journals]
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