Market Pulse53Neutral

Southwest Airlines Co.Opportunity Rank #48(LUV) Intrinsic Value & DCF Analysis (2026)

Sector: Industrials

Current Price

$44.71

Last updated: Jul 24, 2026

Price vs Intrinsic Value

$44.71
Price
$170.29
Intrinsic Value
Undervalued by 281%MOS: $136.23

Fundamental Score

75/100
Bullish

Weighted across 6 signals

Narrative Score

64/100
Improving

No change vs previous

Trend Score

56/100
Constructive

As of 2026-07-24

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The intrinsic value of Southwest Airlines Co. (LUV) is estimated at $170.29 per share based on a 10-year discounted cash flow (DCF) analysis. At the current price of $44.71, the stock appears undervalued relative to its projected cash flow fundamentals. This estimate assumes a 3.05% long-term growth rate and a 9.00% discount rate (calculated: 7.98%), reflecting expected future free cash flow and cost of capital.

The intrinsic value of Southwest Airlines Co. (LUV) is estimated at $170.29 per share based on a 10-year discounted cash flow (DCF) analysis. At the current price of $44.71, the stock appears undervalued relative to its projected cash flow fundamentals. This estimate assumes a 3.05% long-term growth rate and a 9.00% discount rate (calculated: 7.98%), reflecting expected future free cash flow and cost of capital.

Valuation Details

$170.29
280.88% upside
20% margin of safety: $136.23
Years: 10Growth Rate: 3.05%
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Capital Efficiency

Average Quarterly ROIC
2.4%
Cost of Capital (estimated)11%
Value StatusUnderperforming Capital

The company is earning below its required return. This may indicate inefficient use of capital or excess cash that isn't being reinvested.

Complete historical ROIC is available with
.

Fundamental Details

75/100
BullishWeighted across 6 signals
DCF Discount
280.9% discount to price
100
FCF Yield
25.5% trailing FCF yield
100
ROIC vs WACC
ROIC 2.4% vs WACC 11.0% (0.2x)
11
Net Debt / FCF
0.4x net debt to FCF
92
Buybacks
Share count shrinking
80
FCF CAGR (5Y)
473.2% 5Y FCF CAGR (adjusted)
100
Strengths: DCF Discount, FCF Yield. Concerns: ROIC vs WACC.

Narrative Details

64/100
Improving
Vs 6-Month Baseline:Above Avg (63rd pct)Weighted across 6 recent drivers
Trend: StableConfidence: 100%Updated: 1d ago
Sources: 96 (77 News · 19 Analyst)
Drivers(last 30 days)
15 regulatory scrutiny+1.5
4 earnings beat-0.5
2 upgrade headlines+0.5
54 news sentiment-0.2
Downgrade headlines+0.0
Promotions/discounting+0.0

Trend Details

56/100
ConstructiveAs of 2026-07-24310 daily bars used
3M Relative Strength vs SPY+15.1%
Price vs 21 EMA-5.6%
21 EMA vs 50 EMA+3.2%
Price vs 21 EMA19 · -5.6%
Price vs 50 EMA38 · -2.5%
21 EMA vs 50 EMA74 · +3.2%
3M RS vs SPY93 · +15.1%
6M RS vs SPY47 · -1.0%
Distance from 52W High65 · -17.7%

Investment Coach

Updating... 44d ago
BUYConfidence: 62%
Thesis
Southwest Airlines Co. (LUV) is significantly undervalued with an estimated fair value 285.7% above its current price, supported by a strong fundamental score of 75 and a healthy free cash flow yield of 25.7%. Despite trailing returns relative to its cost of capital, the company's robust buybacks and impressive free cash flow growth suggest potential for substantial upside.
Key Risk
The key risk is the negative spread between ROIC and WACC, indicating returns are currently below the cost of capital, which could pressure valuation if not improved.
Signals To Watch
  • Monitor whether valuation discount remains above 10%.
  • Track ROIC vs WACC spread for sustained improvement.
  • Follow narrative trend for meaningful shifts in the score direction.
Ask the Coach - Available with
Historical Growth Rates
Free Cash Flow- - -Trend CAGR: 3.05%5 Year CAGR: 14.50%

Free Cash Flow (in millions)

TTM20252024202320222021202020192018201720162015201420132012201120102009200820072006
$5,575$4,515$2,542$6,684$7,736$2,833-$612$5,014$6,869$6,178$6,440$5,381$4,730$3,937$3,412$2,353$2,054$1,570-$598$4,176$2,805

How Intrinziq Estimates Fair Value

Intrinziq estimates Southwest Airlines Co.'s intrinsic value using a discounted cash flow (DCF) model based on free cash flow trends and a market-based discount rate. The model projects future cash flows over ten years and discounts them using a market return assumption to estimate fair value.

Southwest Airlines Co.Industrials

Southwest Airlines Co. functions as a passenger airline, offering scheduled air travel services predominantly across the United States and to select neighboring international markets. As of December 31, 2021, the company maintained a consistent fleet of 728 Boeing 737 aircraft. Its extensive route network served 121 different locations, spanning 42 U.S. states, the District of Columbia, and the Commonwealth of Puerto Rico, along with 10 international countries close by. These international destinations include Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. To enhance the passenger journey, Southwest provides in-flight entertainment and internet access on its Wi-Fi-enabled planes. The airline also runs the Rapid Rewards loyalty program, enabling members to accumulate points proportional to the money spent on Southwest's base fares. For customer convenience in travel planning, the company offers a range of digital tools, including its official websites and mobile applications, as well as SWABIZ, a dedicated online booking platform for business clients. Additional services available include EarlyBird Check-In, preferred boarding options, and transportation for pets and unaccompanied minors. The company was founded in 1967 and its corporate headquarters are situated in Dallas, Texas.