Discounted Cash Flow (DCF) Analysis Levered

Southwest Airlines Co. (LUV)

$37.73

+1.79 (+4.98%)
All numbers are in Millions, Currency in USD
Stock DCF: 45.38 | 37.73 | undervalue

Free Cash Flow

Year
A/P
2017
Actual
2018
Actual
2019
Actual
2020
Actual
2021
Actual
2022
Projected
2023
Projected
2024
Projected
2025
Projected
2026
Projected
Revenue 21,17121,96522,4289,04815,79016,607.7017,467.7518,372.3419,323.7720,324.47
Revenue (%)
Operating Cash Flow 3,9294,8933,987-1,1272,3222,021.532,126.222,236.332,352.142,473.95
Operating Cash Flow (%)
Capital Expenditure -2,249-1,976-1,027-515-511-1,100.30-1,157.29-1,217.22-1,280.25-1,346.55
Capital Expenditure (%)
Free Cash Flow 1,6802,9172,960-1,6421,811921.23968.941,019.111,071.891,127.40

Weighted Average Cost Of Capital

Share price $ 37.73
Beta 0.923
Diluted Shares Outstanding 607
Cost of Debt
Tax Rate 26.26
After-tax Cost of Debt 2.59%
Risk-Free Rate
Market Risk Premium
Cost of Equity 7.481
Total Debt 12,281
Total Equity 22,902.11
Total Capital 35,183.11
Debt Weighting 34.91
Equity Weighting 65.09
Wacc

Build Up Free Cash Flow

Year
A/P
2017
Actual
2018
Actual
2019
Actual
2020
Actual
2021
Actual
2022
Projected
2023
Projected
2024
Projected
2025
Projected
2026
Projected
Revenue 21,17121,96522,4289,04815,79016,607.7017,467.7518,372.3419,323.7720,324.47
Operating Cash Flow 3,9294,8933,987-1,1272,3222,021.532,126.222,236.332,352.142,473.95
Capital Expenditure -2,249-1,976-1,027-515-511-1,100.30-1,157.29-1,217.22-1,280.25-1,346.55
Free Cash Flow 1,6802,9172,960-1,6421,811921.23968.941,019.111,071.891,127.40
WACC
PV LFCF 695.91692.02688.15684.31680.48
SUM PV LFCF 4,306.45

Terminal Value

Growth in perpetuity method:
Long-term growth rate
WACC (%) 5.77
Free cash flow (t + 1) 1,149.95
Terminal Value 30,502.58
Present Value of Terminal Value 23,042.21

Intrinsic Value

Enterprise Value 27,348.65
Net Debt -199
Equity Value 27,547.65
Shares Outstanding 607
Equity Value Per Share 45.38