Market Pulse50Neutral

Southwest Airlines Co.Opportunity Rank #71(LUV) Intrinsic Value & DCF Analysis (2026)

Sector: Industrials

Current Price

$40.35

Last updated: Mar 24, 2026

Price vs Intrinsic Value

$40.35
Price
$130.25
Intrinsic Value
Undervalued by 223%MOS: $104.20

Fundamental Score

74/100
Bullish

Weighted across 6 signals

Narrative Score

48/100
Weak

-1 vs previous

The intrinsic value of Southwest Airlines Co. (LUV) is estimated at $130.25 per share based on a 10-year discounted cash flow (DCF) analysis. At the current price of $40.35, the stock appears undervalued relative to its projected cash flow fundamentals. This estimate assumes a 2.86% long-term growth rate and a 9.00% discount rate (calculated: 7.97%), reflecting expected future free cash flow and cost of capital.

The intrinsic value of Southwest Airlines Co. (LUV) is estimated at $130.25 per share based on a 10-year discounted cash flow (DCF) analysis. At the current price of $40.35, the stock appears undervalued relative to its projected cash flow fundamentals. This estimate assumes a 2.86% long-term growth rate and a 9.00% discount rate (calculated: 7.97%), reflecting expected future free cash flow and cost of capital.

Valuation Details

$130.25
▲ 222.80% upside
20% margin of safety: $104.20
Years: 10Growth Rate: 2.86%
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Capital Efficiency

Average Quarterly ROIC
1.41%
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

74/100
BullishWeighted across 6 signals
DCF Discount
222.8% discount to price
100
FCF Yield
21.6% trailing FCF yield
100
ROIC vs WACC
ROIC 1.4% vs WACC 11.0% (0.1x)
6
Net Debt / FCF
0.4x net debt to FCF
93
Buybacks
Share count shrinking
80
FCF CAGR (5Y)
452.1% 5Y FCF CAGR (adjusted)
100
Strengths: DCF Discount, FCF Yield. Concerns: ROIC vs WACC.

Narrative Details

48/100
Weak
-1 vs previous · +1 new driversVs 6-Month Baseline:Low (19th pct)Weighted across 6 recent drivers
Trend: Improving upConfidence: 95%Updated: 1h ago
Sources: 141 (114 News · 27 Analyst)
Drivers(last 30 days)
15 regulatory scrutiny-0.1
94 news sentiment-0.1
4 analyst upgrades+0.0
2 upgrade headlines+0.0
Earnings beat+0.0
Restructuring-0.0

Investment Coach

Updated 18h ago
BUYConfidence: 62%
Thesis
Southwest Airlines Co. is significantly undervalued with an estimated fair value 230% above its current price, supported by strong fundamentals including a healthy free cash flow yield of 21.6%. Despite trailing returns relative to its cost of capital, the company demonstrates robust cash flow growth and effective buybacks, indicating potential for substantial upside.
Key Risk
The key risk is the negative spread between ROIC and WACC, which may indicate challenges in generating returns above the cost of capital.
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: 2.86%5 Year CAGR: 9.77%

Free Cash Flow (in millions)

TTM20252024202320222021202020192018201720162015201420132012201120102009200820072006
$4,516$4,515$2,542$6,717$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. operates as a passenger airline company that provide scheduled air transportation services in the United States and near-international markets. As of December 31, 2021, the company operated a total fleet of 728 Boeing 737 aircrafts; and served 121 destinations in 42 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 10 near-international countries, including Mexico, Jamaica, the Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. It also provides inflight entertainment and connectivity services on Wi-Fi enabled aircrafts; and Rapid Rewards loyalty program that enables program members to earn points for dollars spent on Southwest base fares. In addition, the company offers a suite of digital platforms to support customers' travel needs, including websites and apps; and SWABIZ, an online booking tool. Further, it provides ancillary services, such as Southwest's EarlyBird Check-In, upgraded boarding, and transportation of pets and unaccompanied minors. The company was incorporated in 1967 and is headquartered in Dallas, Texas.