Southwest Airlines Co (LUV) stock analysis
Southwest Airlines Co (LUV) clears 5 of this site's 8 mechanical value filters, 3 of 8 Buffett-style checks and 3 of 5 Lynch-style checks. At $42.03 it trades 10.4% above this site's neutral DCF value (a margin of safety of -10.4%). Its earnings quality rates Strong and it returns +14.3% to shareholders net of dilution. Figures are as of October 23, 2026, from SEC filings and market data refreshed weekly; this is educational analysis, not investment advice.
Data as of October 23, 2026. Refreshed weekly from SEC filings and market data.
What does Southwest Airlines do?
Southwest Airlines is a major US passenger airline that flies mainly domestic and nearby international routes using only Boeing 737 aircraft.
Brands and businesses it owns
- Rapid Rewards
What stands out about Southwest Airlines?
- The share price implies 10.5% yearly growth. At $42.03, LUV's free cash flow of $2.23 per share would have to grow 10.5% a year, fading to 2.5% by year 10, for this site's DCF (10% discount rate) to match the price. This site's baseline starts at 8%, so the price asks for more growth than the baseline. Change the assumptions.
- Misses 1 of the 8 value filters. It fails Market Cap > $25B ($19.9B); the other 5 pass and 2 were not evaluated. See every filter.
- Weakest against peers: return on equity. At 11% (peer median 25%) it ranks 13th of 13 among transportation stocks this site tracks. See the ranking.
- Short interest is elevated. 5.1% of the float is sold short, 3.5 days to cover, above this site's 5% flag. See the figures.
- Dividend raises 1 of 6 flags. Its trailing yield is 2.93%. See the Sustainable Dividend Screener.
How has Southwest Airlines' share price moved?
The interactive price chart needs JavaScript.
Is Southwest Airlines undervalued? The value diligence check
Every value-investing signal this site computes for this stock, gathered in one place: the same real numbers from the tools below, not a new score.
- Margin of safety (DCF) -10.4%
- P/E vs. its own history 23.8x · at/below its cheapest point Real range: 26.7x–52.3x over 5 years (net income per diluted share from each fiscal year's 10-K, paired with the real closing price at that fiscal year-end).
- Wall St. analyst rating Hold · 3.43/5 30 analysts this month: 2 strong buy, 12 buy, 13 hold, 3 sell, 0 strong sell (Finnhub). Up from 3.40 last month.
- Altman Z″-Score (bankruptcy risk) 1.14 · Grey zone
- Earnings quality (is the profit real?) Strong · all 5 checks clean Beneish M-score −2.64 · accruals −4.5% of assets · 399% of profit arrived as cash · stock comp 0.4% of revenue · share count −6.6% a year. From the latest 10-K (year to Dec 2025) - see the Earnings Quality Screener for how each check is scored.
- Shareholder yield (cash back to owners) +14.3% net Latest fiscal year (2025): dividends 2.0% + buybacks 12.8% − stock comp 0.5%, as a share of today's market cap. Over 14 years its split-adjusted share count fell 28%. See Shareholder Yield Leaders.
- Capital needed to grow (See's test) Profit did not grow in 10 years Operating profit $3.4B → $324M, capital needed $14B → $12B, 2016–2025 (3-year averages); return on capital now 3% before tax. Buffett's See's Candies needed $0.42 per $1 of new profit, FlightSafety $3.20, a typical grower about $5. See Capital-Light Compounders.
- PEG (growth at a reasonable price) 0.29 · Well under fair P/E 23.8× ÷ 82.9% a year of growth behind it. 23rd lowest of 447 stocks with a usable PEG. Lynch's fair value is a PEG of 1; a very high PEG usually means almost no growth, a very low one a profit spike. See PEG Ratio Ranking.
- Compounder lenses (4) 3 of 4 · misses capital-light Capital-light growth: not cleared (profit grew 0.1×, under 2×); Profit is real: cleared; Cash to owners: cleared; Fair price (PEG): cleared. See Compounders at a Fair Price, which also lets you move the PEG bar.
- Value trap check Clear
- Munger's Inversion Check 1 flag
- Standing vs. sector peers 4 of 7 measures above the median Compared with the 12 other transportation stocks this site tracks: 1 in the top third, 2 in the bottom third.
- Dividend payout sustainability 1/6 flags
How does Southwest Airlines compare with its peers?
4 of 7 measures sit above the median of the 12 other transportation stocks tracked here, 1 in the top third and 2 in the bottom third.
- P/E ratiolower is cheaper · peer median 23.9× 23.8× –6th of 13
- Free-cash-flow yieldhigher is cheaper · peer median 5.2% 5.3% –6th of 13
- Return on equityhigher is better · peer median 25% 11% ✕13th of 13
- Net marginhigher is better · peer median 5.5% 2.8% ✕13th of 13
- Revenue growthhigher is better, year on year · peer median 6.8% 9.5% –5th of 13
- Debt / equitylower is safer · peer median 0.84 0.84 –7th of 13
- Dividend yieldamong dividend payers · peer median 1.62% 2.93% ✓2nd of 11
Peers are the stocks this site tracks in the same sector group, not every listed competitor. The bar runs from the weakest peer (left) to the strongest (right); the tick is the middle. Measures that don't apply to a sector (cash-flow yield for banks, debt for financials) are left out.
What would Buffett & Lynch say?
Buffett's checklist is built around durable, profitable businesses bought at sensible prices, and LUV doesn't clear enough of it yet. In its favor: LUV is currently earning a strong return on shareholders' equity, earns many times its interest expense, so debt service isn't a worry, and trades at a reasonable multiple of owner earnings, his own term for the real cash a business could pay out. Where it comes up short: LUV and its five-year average return on equity falls short too, so this isn't just a one-off dip, carries more debt relative to equity than he typically tolerates, runs thinner pretax margins than he'd like to see, hasn't grown earnings per share fast enough over five years to impress him, and is trading above what a conservative discounted-cash-flow estimate says it's worth right now.
- ROE (TTM) > 11% ✓
- ROE (5yr avg) > 11% ✕
- Debt/Equity < 0.5 ✕
- Pretax margin > 15% ✕
- EPS growth (5yr) > 7% ✕
- Interest coverage > 5x ✓
- Trading below intrinsic value (DCF) ✕
- Price vs. owner earnings < 25x ✓
- Bonus: returning capital via buybacks FY2025
Lynch looked for growth stories that weren't overpriced for that growth, and LUV falls short of his bar. In its favor: LUV clears an even tighter PEG-under-1 bar he'd want for a stock growing this fast, isn't asking too much even by a fast grower's usual richer multiple, and is generating real cash to back up a fast grower's higher price tag. Where it comes up short: LUV is growing earnings outside the 20-50% band he considered sustainable for a fast grower - either not fast enough to earn the label, or a pace he'd flag as unlikely to hold up, and is leaning on more debt than he liked a growth story to carry.
- PEG < 1 (stricter for fast growers) ✓
- EPS growth 20%-50% ✕
- Debt/Equity < 0.5 ✕
- P/E < 40 ✓
- Price/FCF < 40 ✓
Quantitative approximations of each investor's documented approach, not endorsed by either investor or their estates - commentary, not this site's actual ranking criteria. Buffett never published a numeric checklist: only 2 of his 8 checks here trace to his own documented concepts ("owner earnings," from his 1986 shareholder letter, and "price is what you pay, value is what you get," his case against fixed P/E/P/B ceilings) - the other 6 (ROE, debt, margins, growth, interest coverage) use commonly-cited thresholds that are not numbers he himself published. The 8 hard filters below (plus the Munger check and Graham margin of safety) are this site's real, mechanical screen and are computed completely independently of the checklists above.
Berkshire Hathaway's own filing
Which of the 8 value filters does Southwest Airlines pass?
- Market Cap > $25B $19.9B
- Trailing P/E < 25 23.77
- PEG Ratio < 1.5 0.29
- Price/Book < 8 2.81
- Price/Sales < 7 0.66
- EPS Growth YoY > -5% +20.0%
- vs 50-day MA (±12%) Not evaluated †
- vs 200-day MA (±12%) Not evaluated †
What is Southwest Airlines' margin of safety?
-17% on 2026-10-07 → -10% on 2026-10-23 (5 weekly readings).
Where is Southwest Airlines in its 52-week range?
What is the short interest in Southwest Airlines?
24,543,297 shares short as of 2026-09-30 (FINRA settlement date). Reported twice a month, so this only changes roughly every two weeks, not daily.
What could go wrong with Southwest Airlines? Munger's inversion check
"Invert, always invert." Instead of reasons to buy, these are reasons to hesitate, not a verdict, and not everything worth knowing about a business.
- Margin of safety, even in the bull case +35%
- Short interest under 5% of float 5.1%
- Passes most of the 6 fundamental filters 5/6 passed
- Price run-up backed by value, not just momentum +40% off 52wk low
- Debt/equity stable since 2016 0.43 → 0.61
Doesn't cover circle of competence, management quality, or accounting concerns: those need judgment, not data.
How much have Southwest Airlines shareholders gained per year?
Not enough clean earnings history to compute this for LUV yet - a loss year in the window breaks the growth math rather than faking a number through it.
An earnings-based proxy, not a stock-price total return - it doesn't capture multiple expansion/contraction or reinvested dividends. EPS from LUV's own 10-K filings; dividend yield is the current trailing yield on today's price, from the same weekly fetch as the rest of this site.
What do Southwest Airlines' 10-year financials show?
From LUV's own 10-K filings (SEC EDGAR): up to the last 10 fiscal years. Press any year's bars for the exact figures.
Frequently asked questions about Southwest Airlines
What kind of company is Southwest Airlines?
Southwest Airlines is a major US passenger airline that flies mainly domestic and nearby international routes using only Boeing 737 aircraft. Brands and businesses it owns include Rapid Rewards. This site groups it with Airlines stocks.
Is Southwest Airlines trading above or below its DCF value?
At $42.03, LUV trades 10.4% above this site's neutral DCF value of $38.05 per share, a margin of safety of −10.4%. That DCF projects free cash flow for 10 years, with growth starting at 8% and fading to 2.5%, discounted at 10%; it is one set of assumptions, not a forecast. Test your own in the Intrinsic Value Calculator.
How many of this site's 8 value filters does Southwest Airlines pass?
LUV passes 5 of 8. It passes Trailing P/E < 25 (23.77), PEG Ratio < 1.5 (0.29), Price/Book < 8 (2.81), Price/Sales < 7 (0.66) and EPS Growth YoY > -5% (+20.0%). It misses Market Cap > $25B ($19.9B). vs 50-day MA (±12%) and vs 200-day MA (±12%) were not evaluated, because the moving-average checks only run on stocks that clear the fundamentals first. The 8-filter list shows every stock that passes all of them.
How much cash does Southwest Airlines return to shareholders?
LUV's net shareholder yield is +14.3%: the cash it returns through dividends and buybacks, minus stock-based compensation, as a share of its market value. Latest fiscal year (2025): dividends 2.0% + buybacks 12.8% − stock comp 0.5%, as a share of today's market cap. Over 14 years its split-adjusted share count fell 28%. Its trailing dividend yield is 2.93%, paid out of 49% of its free cash flow; the dividend-sustainability check raises 1 of 6 flags (a risky earnings payout). See Shareholder Yield Leaders and the Sustainable Dividend Screener.
How risky is Southwest Airlines's balance sheet?
LUV's Altman Z″-Score is 1.14, which falls in the grey zone. Altman's own thresholds are above 2.6 for the safe zone, 1.1 to 2.6 for the grey zone and below 1.1 for the distress zone; the score blends working capital, retained earnings, operating profit and equity against liabilities. Its debt-to-equity ratio is 0.84, against a sector median of 0.84. See the Altman Z″-Score list.
How heavily is Southwest Airlines stock sold short?
As of September 30, 2026, 5.1% of LUV's float was sold short (24,543,297 shares, 3.5 days to cover), up 11.2% from the prior reporting period. FINRA publishes short interest twice a month, so it changes about every two weeks; this site flags anything above 5% of the float.
Where do these numbers come from?
- Financial statements: Southwest Airlines's 10-K annual report for the year ended Dec 31, 2025, filed Feb 5, 2026 (filing index). Every earlier year in the 10-year financials comes from the company's older 10-K filings, all listed on SEC EDGAR.
- Prices and market data: quotes, P/E and analyst ratings from Finnhub; daily price history and the 52-week range from Twelve Data, both refreshed weekly. Short interest comes from FINRA, reported twice a month.
- How to check a figure: click any number in the card above to see its exact source, and read the Editorial Standards for every rule behind the checks.
About this Southwest Airlines Co analysis
This page shows every value-investing check the site runs on Southwest Airlines Co (LUV) in one place: the 8 mechanical filters, the Buffett and Lynch checklists, a margin of safety from a disclosed DCF, earnings quality, shareholder yield and how it ranks against its sector peers. The numbers come from SEC filings and public market data, refreshed weekly, and the same rules apply to every stock on the stock list. See Editorial Standards for the sources and the rules, or run your own filters in the stock screener.