Southwest Airlines Co. (LUV)
Quantitative Summary
DeterministicAt 28.6x earnings — a 36% discount to the sector average of 44.7x — LUV is in the lower valuation range. Strong operational fundamentals (Piotroski 7/9) with Altman Z of 2.2.
Generated deterministically from quant metrics and financial statements. Not a recommendation.
Algorithmic Teardown
AI-GeneratedThe fundamental economics of the company reveal a significant capital efficiency challenge, characterized by an ROIC-WACC spread of -7.2%, indicating that current operations are destroying value relative to the cost of capital. Despite a Piotroski F-Score of 7/9 suggesting strong balance sheet health and low earnings manipulation risk per Beneish (-2.65), the DuPont decomposition highlights a fragile return profile driven primarily by high leverage (3.64x equity multiplier) rather than operational excellence, as evidenced by modest net margins of 1.6% and single-digit revenue growth of 2.1%. The low profitability factor score of 0.005 further underscores the lack of robust margin expansion or asset turnover improvements to offset these structural headwinds.
Valuation metrics present a divergence between market pricing and historical norms, with the current P/E multiple at 47.6x trading above the sector average of 44.2x. This premium appears disconnected from the underlying cash flow generation implied by the negative ROIC spread and low margin environment, suggesting the market may be pricing in aggressive future growth or intangible brand value not yet reflected in current earnings power. While the Fama-French alpha stands at an anomalously high 18.56% annually, this metric must be weighed against the company's exposure to the industrials sector and its neutral insider flow over the last ninety days, which offers no signal of anticipated corporate restructuring or strategic shifts from management.
The risk/reward profile is defined by a tension between strong solvency indicators and deteriorating capital returns. The Altman Z-Score of 2.2 places the firm in the gray zone regarding bankruptcy probability, necessitating close monitoring as leverage remains elevated to sustain ROE. Investors must reconcile whether the current valuation premium can be justified if operational levers such as net margin or asset turnover fail to improve significantly given the negative spread between returns and financing costs. The absence of insider trading activity provides no additional directional signal amidst these mixed fundamental data points.
Generated by LLM from quantitative data inputs. May contain inaccuracies. Not investment advice.
Valuation Context
Currently trading 26% below its 5-year average P/E of 68.0x.
Price Chart with Moving Averages
Technical Setup
AI GeneratedThe current technical configuration for Southwest Airlines Co. presents a complex interplay between price action and volume that warrants close observation of institutional positioning. With the stock trading at $39.56, market participants are likely analyzing whether recent price movements represent genuine accumulation or distribution phases rather than simple retail speculation. The absence of specific moving average crossover data in the provided snapshot prevents a definitive conclusion on trend direction, yet the focus remains on how larger capital allocators might be reacting to these levels. If institutional players were aggressively accumulating shares at this valuation, one would typically expect to see sustained upward price pressure accompanied by expanding volume profiles, signaling confidence in future upside potential. Conversely, if volume is declining while prices remain stable or drift lower, it could suggest a lack of aggressive buying interest from major funds who might be waiting for clearer confirmation before committing significant capital. The sector classification as Industrials adds another layer to the analysis, implying that institutional behavior here may be correlated with broader macroeconomic indicators affecting travel demand and operational costs rather than isolated company news. Without explicit volume trends or crossover signals in the input data, any assertion regarding heavy buying or selling by large entities remains speculative. The price level of $39.56 serves as a neutral reference point where market sentiment is currently balanced, potentially acting as a pivot zone for institutional strategies ranging from hedging to strategic entry points. Ultimately, determining whether this setup indicates smart money positioning for an uptrend or defensive posturing requires further data on how trading volume evolves
Quant Health Deep Dive
Profitability & Value Creation
DuPont Analysis — ROE Decomposition
Breaking down Return on Equity to see how the company generates its ROE — efficiency, margins, or leverage.
Balance Sheet Health
Earnings Surprise History
EPS estimates vs actuals for the most recent reported quarters. Source: yfinance.
Dividend History
| Date | Amount | Change |
|---|---|---|
| 2026-03-12 | $0.1800 | 0.0% |
| 2025-12-26 | $0.1800 | 0.0% |
| 2025-09-03 | $0.1800 | 0.0% |
| 2025-06-18 | $0.1800 | 0.0% |
| 2025-03-12 | $0.1800 | 0.0% |
| 2024-12-26 | $0.1800 | 0.0% |
| 2024-09-04 | $0.1800 | 0.0% |
| 2024-06-18 | $0.1800 | 0.0% |
| 2024-03-05 | $0.1800 | 0.0% |
| 2023-12-20 | $0.1800 | 0.0% |
| 2023-09-05 | $0.1800 | 0.0% |
| 2023-06-20 | $0.1800 | 0.0% |
Dividend and split data from SEC filings and market data. Amounts are per share, not adjusted for splits. Source: yfinance.
Risk Profile
Sharpe = risk-adjusted return (higher is better). Max drawdown = largest peak-to-trough decline. 1,200+ trading days.
Underwater (Drawdown from Peak)
How far below the all-time high the price has been over time. Deeper = more pain for holders.
Rolling 60-Day Beta vs S&P 500 (VOO)
How the stock's sensitivity to market moves changes over time. β > 1 = more volatile than the market.
Fama-French 5-Factor Exposure
Academic factor model decomposition — what's really driving this stock's returns.
Fama-French 5-Factor Model. Data: Kenneth French Data Library. Regression over 3 years of daily returns.
Fundamentals
Passive Flow Attribution
ETF Draft EffectWhen investors buy or sell ETFs like XTN or XLI, the fund manager is mechanically forced to buy or sell LUV shares regardless of Southwest Airlines Co.'s individual fundamentals. We estimate $2.8B of passive capital is structurally linked to LUV through 8 tracked ETFs. Index rebalances and ETF creation/redemption cycles can create noticeable volume spikes unrelated to company news.
Passive exposure = Σ (ETF AUM × stock weight in ETF) across 8 tracked ETFs. Actual passive ownership is larger (includes mutual funds). Not investment advice.
ETF Contagion Visualizer
Simulate a price drop in Southwest Airlines Co. to visualize passive redemption contagion across ETFs and collateral stocks.
If Southwest Airlines Co. (LUV) experiences a significant drawdown, ETF redemptions can create collateral selling pressure on co-held stocks. Our model identifies CATERPILLAR INC (CAT) as the most exposed collateral stock, sharing 1 ETFs with LUV. This is the "Passive Contagion" effect described in the Inelastic Market Hypothesis.
Contagion model based on shared ETF exposure and constituent weights across 29 tracked ETFs. Estimated selling pressure is a simplified model — actual impact depends on market liquidity, ETF redemption mechanics, and market-maker activity.
LUV Ownership Dynamics
Passive funds hold 1 in every 7 LUV shares, reducing daily market volatility.
Southwest Airlines Co. (LUV) exerts notable gravity on the passive index market, currently representing 2.2% of the XTN (XTN) and 0.4% of the State Street Industrial Select Sector SPDR ETF (XLI). Across 29 tracked ETFs, approximately 74M shares (15.2% of float) are held by passive funds and rarely trade on the open market. This level of passive ownership means index rebalances can create outsized volume events.
ETFs with Highest LUV Exposure
Float lock-up computed from 29 ETFs tracked by SecuritiesDB. Actual passive ownership is higher (includes mutual funds, pension funds, etc.).
LUV Institutional Volume Profile
252-day volume distribution by price level. The Point of Control (POC) marks — the price where the most institutional volume transacted — an implicit support/resistance floor.
The highest-volume price zone for Southwest Airlines Co. over the past year sits near $31.99 (21% of 252-day volume). The current price of $42.34 trades 32.3% above this institutional floor — a sign of upside momentum, though a pullback to the POC zone is a common reversion target. The highly concentrated volume profile (21% at POC) indicates strong consensus on fair value — institutional participants have repeatedly transacted near this price.
Volume Profile computed from 252 trading days of OHLCV data. Volume allocated to price bins proportionally based on daily high-low range. Not investment advice.
LUV Capital Efficiency
How efficiently does Southwest Airlines Co. convert operating profits into free cash? The FCF Conversion ratio measures the gap between accounting earnings and real cash generation.
Southwest Airlines Co. converts -37% of its EBITDA into free cash flow, negative FCF conversion — the company is consuming cash faster than it generates EBITDA, which is unsustainable long-term. The 137% reinvestment rate signals aggressive capacity expansion. However, the ROIC-WACC spread is negative (-7.6%), suggesting reinvested capital is destroying shareholder value.
Capital efficiency = Free Cash Flow ÷ EBITDA. Reinvestment = (EBITDA − FCF) ÷ EBITDA. Metrics from latest annual filings. Not investment advice.
Fails-to-Deliver (FTD) History
SEC-reported settlement failures. Elevated FTDs can indicate high short-selling pressure, operational settlement issues, or naked shorting activity.
| Date | Failed Shares | Close Price | Notional Value |
|---|---|---|---|
| 2026-05-13 | 2,401 | $39.48 | $94,791.48 |
| 2026-05-11 | 554 | $41.31 | $22,885.74 |
| 2026-04-28 | 29,124 | $38.20 | $1.1M |
| 2026-04-27 | 66,189 | $39.45 | $2.6M |
| 2026-04-20 | 200 | $42.70 | $8,540 |
| 2026-04-15 | 3 | $41.26 | $123.78 |
| 2026-04-13 | 1,218 | $39.56 | $48,184.08 |
| 2026-04-09 | 561 | $40.40 | $22,664.4 |
| 2026-03-31 | 27,136 | $36.29 | $984,765.44 |
| 2026-03-24 | 2,286 | $40.35 | $92,240.1 |
| 2026-03-23 | 26 | $39.41 | $1,024.66 |
| 2026-03-10 | 1,078 | $43.03 | $46,386.34 |
| 2026-02-26 | 4,184 | $49.89 | $208,739.76 |
| 2026-02-24 | 30,535 | $50.90 | $1.6M |
| 2026-02-13 | 180,967 | $50.83 | $9.2M |
| 2026-02-09 | 96 | $54.26 | $5,208.96 |
| 2026-02-03 | 251,930 | $49.64 | $12.5M |
| 2026-02-02 | 73,070 | $47.52 | $3.5M |
| 2026-01-30 | 78,107 | $48.50 | $3.8M |
| 2026-01-20 | 9,345 | $43.12 | $402,956.4 |
| 2026-01-15 | 1,281 | $42.55 | $54,506.55 |
| 2026-01-13 | 1 | $43.85 | $43.85 |
| 2026-01-12 | 72,561 | $44.52 | $3.2M |
| 2026-01-02 | 7,200 | $41.33 | $297,576 |
| 2025-12-29 | 2,800 | $41.28 | $115,584 |
| 2025-12-26 | 1,200 | $41.48 | $49,776 |
| 2025-12-24 | 330,753 | $41.56 | $13.7M |
| 2025-12-23 | 378,444 | $42.24 | $16.0M |
| 2025-12-22 | 326 | $41.26 | $13,450.76 |
| 2025-12-16 | 12,530 | $41.72 | $522,751.6 |
Source: SEC Regulation SHO FTD data. Data is reported with a ~30 day delay. High FTD quantities relative to average daily volume may indicate settlement stress.
Price Correlations
Statistical correlation of daily returns with other stocks. High correlations indicate stocks that move together; negative correlations can offer diversification.
| Peer | 252-Day (1Y) | 126-Day (6M) | Direction |
|---|---|---|---|
| WTGXX | NaN | NaN | |
| AAL | 0.690 | 0.624 | Moderate |
| DAL | 0.665 | 0.670 | Moderate |
| RCL | 0.617 | 0.659 | Moderate |
| UAL | 0.617 | 0.617 | Moderate |
| CCL | 0.610 | 0.660 | Moderate |
| MAR | 0.545 | 0.529 | Moderate |
| ONB | 0.543 | 0.496 | Moderate |
| TFC | 0.542 | 0.544 | Moderate |
| ASB | 0.530 | 0.510 | Moderate |
Pearson correlation of daily log returns. 252d ≈ 1 trading year. Computed from price history. Not investment advice.
Compare LUV to Peers
Quant metrics computed deterministically from financial statements and price data. Updated: 2026-06-02.
SecuritiesDB provides programmatic data aggregation for informational purposes only. None of the metrics, summaries, or algorithmic flags constitute a recommendation to buy or sell any security.