Southwest Airlines Co. (LUV)

FairStock Score: 44/100 — MIXED

Key Financials

AI Analysis

AI-generated, general educational analysis — not personal investment advice.

I look at Southwest as a cyclical airline, not a steady compounder. In fiscal Q3 2026, the quarter ended 2026-09-30, revenue was $8.4B, net income $270M, and diluted EPS $0.55; that compares with $6.9B revenue, $54M net income, and $0.10 EPS in fiscal Q3 2025. The improvement is real, and FairStock’s Piotroski F-score of 7/9 suggests some accounting strength. But the industry remains cyclical, and the moat is not what it once was: airlines sell a commodity seat, labor is powerful, and capital intensity is high. Financial health is only fair. Free cash flow is -$557M over trailing twelve months, a -2.7% FCF yield, debt-to-equity is 0.97, ROCE is just 2.32%, and Altman Z-score is 1.35. The balance sheet and cash generation do not give Graham-style comfort. At the $42.85 close on 2026-10-26, FairStock’s P/E is 26.78, P/B 2.96, PEG 2.78, and EV/EBITDA 8.47. The Graham Number is $22.24, so the price sits 87.72% above that conservative value line. The FairStock score is 44/100. The dividend yields 1.76%, which is modest. Growth is present: fiscal Q1 2026 revenue was $7.2B and net income $227M; fiscal Q2 2026 revenue was $8.4B and net income $233M; fiscal Q3 2026 revenue was $8.4B and net income $270M. Still, full-year FY2025 net income was $441M, and FY2024 was $465M, so the long-term profit record is thin. I would call this a leveraged cyclical with improving near-term numbers but a price that already reflects a lot of hope. I want a wider margin of safety and positive free cash flow before calling it a bargain.

In plain English: Southwest Airlines flies passengers in the United States and abroad and also runs a loyalty program. The business looks mixed: quarterly profit is much better than a year earlier, but the company is not generating spare cash and carries meaningful debt. At $42.85, the stock looks expensive compared with the company’s earnings and net assets.

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Data as of 2026-10-26 close · note generated 2026-10-28 · model deepseek-flash

Sources (SEC EDGAR): fiscal Q3 2026 10-Q (period ended 2026-09-30) · fiscal Q2 2026 10-Q (period ended 2026-06-30) · fiscal Q1 2026 10-Q (period ended 2026-03-31) · fiscal Q3 2025 10-Q (period ended 2025-09-30) · FY2025 10-K (period ended 2025-12-31) · FY2024 10-K (period ended 2024-12-31) · FY2023 10-K (period ended 2023-12-31)

Fundamentals from company filings and market-data providers; prices are end-of-day, not real-time. AI-generated analysis is general and educational — not personal investment advice. Scoring methodology · Score test · Disclaimer