Should I still rely on Southwest Airlines management in October 2019?

In this post I will focus on Southwest Airlines. I will evaluate if Southwest Airlines shares are reasonably priced going into October. This firm Piotroski F Score is 4 - Ordinary. Considering 30-days investment horizon, Southwest Airlines is not expected to generate positive returns. However, the company is as risky as the market. It waists most of its returns potential to compensate for thr risk taken. The market is generating roughly 0.0 per unit of risk. Macroaxis considers Southwest Airlines to be very steady. Southwest Airlines owns Efficiency Ratio (i.e. Sharpe Ratio) of -0.0083 which indicates the firm had -0.0083% of return per unit of risk over the last 1 month. Macroaxis philosophy towards measuring risk of any stock is to look at both systematic and un-systematic factors of the business, including all available market data and technical indicators. Southwest Airlines Company exposes twenty-one different technical indicators which can help you to evaluate volatility that cannot be diversified away. Please be advised to validate Southwest Airlines Coefficient Of Variation of (11,483) and Risk Adjusted Performance of 0.01 to confirm risk estimate we provide.
Published over a year ago
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Reviewed by Raphi Shpitalnik

SOUTHWEST AIRLINE has roughly 3.99B in cash with 2.13B of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 7.42. Southwest Airlines dividends can provide a clue to current valuation of the stock. The firm one year expected dividend income is about $0.3 per share. Lets now take a look at Southwest Airlines Price to Book. Based on latest financial disclosure the price to book indicator of Southwest Airlines Company is roughly 2.69 times. This is 54.41% lower than that of the Industrials sector, and 49.44% higher than that of Airlines industry, The Price to Book for all stocks is 71.71% higher than the firm.
Investing in Southwest Airlines, just like investing in any other equity instrument, is characterized by a strong risk-return correlation. High risks mean high returns and low risk means lower expected returns. Risk management is the act of identifying and assessing the potential risk and developing strategies to minimize these risks and earn maximum possible profits while holding Southwest Airlines along with other instruments in the same portfolio. Using conventional technical analysis and fundamental analysis to select individual securities into a portfolio complements risk management and adds value to overall investors' investing strategies.
Sophisticated investors, who have witnessed many market ups and downs, anticipate that the market will even out over time. This tendency of Southwest Airlines' price to converge to an average value over time is called mean reversion. However, historically, high market prices usually discourage investors that believe in mean reversion to invest, while low prices are viewed as an opportunity to buy.
Please note, it is not enough to conduct a financial or market analysis of a single entity such as Southwest Airlines. Your research has to be compared to or analyzed against Southwest Airlines' peers to derive any actionable benefits. When done correctly, Southwest Airlines' competitive analysis will give you plenty of quantitative and qualitative data to validate your investment decisions or develop an entirely new strategy toward taking a position in Southwest Airlines.

How important is Southwest Airlines's Liquidity

Southwest Airlines financial leverage refers to using borrowed capital as a funding source to finance Southwest Airlines ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Southwest Airlines financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Southwest Airlines' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Southwest Airlines' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Southwest Airlines's total debt and its cash.

Southwest Airlines Gross Profit

Southwest Airlines Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Southwest Airlines previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Southwest Airlines Gross Profit growth over the last 10 years. Please check Southwest Airlines' gross profit and other fundamental indicators for more details.

Southwest Airlines Correlation with Peers

Investors in Southwest can reduce exposure to individual asset risk by holding a diversified portfolio of assets in addition to a long position in Southwest Airlines. Diversification will allow for the same portfolio return with reduced risk. The correlation table of Southwest Airlines and its peers is a two-dimensional matrix that shows the correlation coefficient between pairs of securities Southwest is related in some way. The cells in the table are color-coded to highlight significantly positive and negative relationships. Each cell shows the correlation between one pair of equities and can be used to run pair trading strategies or create efficient portfolios with your current brokerage. Please check volatility of Southwest for more details

Detailed Outlook On Southwest Airlines

The small decline in market price for the last few months may encourage investors to take a closer look at the company as it closed today at a share price of 50.91 on 3786268.000 in trading volume. The company executives did not add much value to Southwest Airlines investors in August. However, diversifying your holdings with Southwest Airlines Company or similar stocks can still protect your portfolio during high-volatility market scenarios. The stock standard deviation of daily returns for 30 days (very short) investing horizon is currently 1.4942. The below-average Stock volatility is a good sign for a longer term investment options and for buy-and-hold investors. Southwest Airlines is trading at 51.38 which is 0.98 percent decrease. Today lowest is 50.91. Southwest Airlines Total Assets is decreasing over the last 4 years. The previous year value of Southwest Airlines Total Assets was 8,954,000,000. Moreover, Southwest Airlines Revenue to Assets is fairly stable at the moment.
Share Based CompensationNet Cash Flow from Operations
 2008 0.00  0.00 
 2009 0.00  0.00 
 2018 0.00  0.00 
 2019 (projected) 0.00  0.00 
The bottom line, I belive Southwest Airlines is currently fairly valued. It Ignores market trends and projects low probability of distress in the next two years. Our present buy vs. sell advice on the venture is Strong Hold.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Rifka Kats do not own shares of Southwest Airlines. Please refer to our Terms of Use for any information regarding our disclosure principles.

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