Discounted Cash Flow (DCF) Analysis Levered

Southwest Airlines Co. (LUV)

$45.9

+0.90 (+2.00%)

All numbers are in Millions, Currency in USD

Stock DCF: 45.99 | 45.9 | 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	21,171	21,965	22,428	9,048	15,790	16,607.70	17,467.75	18,372.34	19,323.77	20,324.47
Revenue (%)
Operating Cash Flow	3,929	4,893	3,987	-1,127	2,322	2,021.53	2,126.22	2,236.33	2,352.14	2,473.95
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	1,680	2,917	2,960	-1,642	1,811	921.23	968.94	1,019.11	1,071.89	1,127.40

Weighted Average Cost Of Capital

Share price	$ 45.9
Beta	0.922
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	7.096
Total Debt	12,281
Total Equity	27,861.30
Total Capital	40,142.30
Debt Weighting	30.59
Equity Weighting	69.41
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	21,171	21,965	22,428	9,048	15,790	16,607.70	17,467.75	18,372.34	19,323.77	20,324.47
Operating Cash Flow	3,929	4,893	3,987	-1,127	2,322	2,021.53	2,126.22	2,236.33	2,352.14	2,473.95
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	1,680	2,917	2,960	-1,642	1,811	921.23	968.94	1,019.11	1,071.89	1,127.40
WACC
PV LFCF						871.39	866.92	862.48	858.07	853.67
SUM PV LFCF										4,312.54

Terminal Value

Growth in perpetuity method:
Long-term growth rate
WACC (%)	5.72
Free cash flow (t + 1)	1,149.95
Terminal Value	30,912.56
Present Value of Terminal Value	23,407.19

Intrinsic Value

Enterprise Value	27,719.73
Net Debt	-199
Equity Value	27,918.73
Shares Outstanding	607
Equity Value Per Share	45.99