Long-established in the Transportation industry, Southwest Airlines Co (LUV, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 1.49%, juxtaposed with a three-month change of -12.41%. However, fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Southwest Airlines Co.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 6/10
- Profitability rank: 7/10
- Growth rank: 1/10
- GF Value rank: 4/10
- Momentum rank: 7/10
Based on the above method, GuruFocus assigned Southwest Airlines Co the GF Score of 69 out of 100, which signals poor future outperformance potential.
Understanding Southwest Airlines Co Business
Southwest Airlines Co, with a market cap of $17.49 billion, is the largest domestic air carrier in the United States by passengers boarded. The company operates over 700 aircraft in an all-Boeing 737 fleet. Despite offering some longer routes and a few perks for business travelers, the airline predominantly specializes in short-haul, leisure flights, using a point-to-point network. Southwest operates a low-cost carrier business model. The company's sales stand at $25.14 billion with an operating margin of 2.07%.
Growth Prospects
A lack of significant growth is another area where Southwest Airlines Co seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -3.8 per year over the past three years, which underperforms worse than 71.02% of 911 companies in the Transportation industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, Southwest Airlines Co predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While Southwest Airlines Co has a strong history, the current indicators suggest a turbulent flight ahead. Will the company be able to navigate these headwinds and maintain its altitude? Only time will tell.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
