Long-established in the Transportation industry, Southwest Airlines Co (LUV, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.96%, juxtaposed with a three-month change of 12.17%. Fresh insights from the GF Score 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.
What Is 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: 5/10
Based on the above method, GuruFocus assigned Southwest Airlines Co a GF Score of 68 out of 100, which signals poor future outperformance potential.
Understanding Southwest Airlines Co's Business
Southwest Airlines Co, with a market cap of $17.54 billion and sales of $25.44 billion, is the largest domestic air carrier in the United States by passengers boarded. Operating over 700 aircraft in an all-Boeing 737 fleet, Southwest Airlines Co specializes in short-haul, leisure flights, using a point-to-point network. The company's operating margin stands at 0.96, and it adheres to a low-cost carrier business model, which has historically allowed it to maintain profitability and a competitive edge within the industry.
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 an average of -3.8% per year over the past three years, which underperforms worse than 71.23% of 921 companies in the Transportation industry. Stagnating revenues may pose concerns in a fast-evolving market. Furthermore, Southwest Airlines Co's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Next Steps
Considering Southwest Airlines Co's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While the company has a solid foundation in the transportation industry, its current trajectory suggests that it may struggle to replicate its past success. Investors should weigh these factors carefully and monitor the company's strategic initiatives to address these challenges. For those seeking to identify other companies with strong GF Scores, GuruFocus Premium members can use the following screener link: GF Score Screen.
Will Southwest Airlines Co navigate through these turbulent times and regain its altitude, or will the headwinds prove too strong? Only time will tell, but informed investors will keep a close eye on the indicators that matter.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
