Southwest Airlines LUVs to Fly

| November 24, 2016

Question
Southwest Airlines LUVs to Fly
Introduction to Southwest Airlines
Southwest Airlines, the darling of the south, has captured hearts and customers over the years with its fun, friendly and high quality air travel experience. Air Southwest Co. was incorporated in March 1967 by NAMES. However not everyone had an affinity with the new startup company. Competitors did their best to keep them out of the business by filing frivolous lawsuits in an effort to slow them down. Southwest eventually prevailed and is now a common household name for air travel (Southwest).
In the early 1970s Southwest started a small triangle of service from Dallas to Houston to San Antonio. They declared a net loss of $3,753,000 in 1971 their first full year of flights. 1973 was their first year to return a profit at a whopping $175,000 and 23 days later they carried their one-millionth customer. By the end of 1974 net income was $2.1 million. And in October 1975 Southwest Airlines common stock was listed for trading on the America Stock Exchange under the ticker symbol LUV. E.F. Hutton was the principal
underwriter (Southwest).

Southwest Stock Data
Shares Outstanding 678.74M
% Held by Insiders

0.13%

% Held by Institutions

82.60%

Financial Ratios
LIQUIDITY RATIOS (Section 3.2)

Company
Investing.co
m

Industry
Investing
.com

2014

2013

2013

Current Ratio

0.79

0.91

0.96

0.72

1.02

Quick Ratio

0.70

0.81

0.87

0.66

0.96

Liquidity ratios

ASSET MANAGEMENT RATIOS (Section 3.3)

Company

Industry

2014

2013

2012

Investing.co
m

Investing
.com

Asset Management ratios
30.52
Inventory
Turnover
Days Sales
Outstanding

28.57

28.57

16.56

8.64

7.09

6.97

Fixed Asset Turnover

1.32

1.34

1.29

Total Asset Turnover

0.91

0.92

182.73

0.87

DEBT MANAGEMENT RATIOS (Section 3.4)
2014

2013

2012

16.84%

16.96%
0.45

0.55

9.95%

18.49%

32.00%

11.94

4.94

3.81

40.72

29.28

Industry
Investing.co
m

20.76%

0.44

Company
Investing.co
m

18.80

Debt Management
ratios
Debt Ratio
Debt-to-Equity Ratio
Market Debt Ratio
Times Interest
Earned
EBITDA Coverage
Ratio
PROFITABILITY RATIOS (Section
3.5)
2014

2013

2012

Profit Margin

4.26%

2.46%

1.14%

Basic Earning Power

6.61%

3.35%

3.90%

2.26%

Return on Equity

10.28%

6.02%

Company
Investing.co
m

2.03

Industry
Investing.co
m

3.84%

Return on Assets

0.40

Profitability ratios
6.11%

4.27%

0.99%

5.77%

4.37%

2.59%

16.10%

12.07%

MARKET VALUE RATIOS (Section 3.6)

Company
Investing.co
m

Industry
Investing.co
m

2014

2013

2012

39.10

33.02

44.79

27.83

34.59

Price-to-Cash Flow Ratio

7.69

3.99

2.74

33.25

31.26

Price-to-EBITDA

6.77

3.77

2.33

Market-to-Book Ratio

4.02

1.99

1.16

4.59

96.29

Market Value ratios
Price-to Earnings
Ratio

Analysis of Data
What can be concluded from the ratios?

Does the data show any warning signs?
Does anything stand out in the data?

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