Southwest Airlines' (NYSE:LUV) Stock Price Has Reduced 27% In The Past Three Years

NYSE:LUV) shareholders should be happy to see the share price up 18% in the last month. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 27% in the last three years, falling well short of the market return.” data-reactid=”28″>Southwest Airlines Co. (NYSE:LUV) shareholders should be happy to see the share price up 18% in the last month. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 27% in the last three years, falling well short of the market return.

See our latest analysis for Southwest Airlines ” data-reactid=”29″> See our latest analysis for Southwest Airlines

Given that Southwest Airlines only made minimal earnings in the last twelve months, we’ll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last three years Southwest Airlines saw its revenue shrink by 1.1% per year. That’s not what investors generally want to see. The annual decline of 8.2% per year in that period has clearly disappointed holders. That makes sense given the lack of either profits or revenue growth. However, in this kind of situation you can sometimes find opportunity, where sentiment is negative but the company is actually making good progress.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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report showing consensus forecasts” data-reactid=”49″>Southwest Airlines is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

What about the Total Shareholder Return (TSR)?

We’ve already covered Southwest Airlines’ share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Southwest Airlines shareholders, and that cash payout explains why its total shareholder loss of 24%, over the last 3 years, isn’t as bad as the share price return.

A Different Perspective

We’ve identified 4 warning signs with Southwest Airlines , and understanding them should be part of your investment process.” data-reactid=”53″>Investors in Southwest Airlines had a tough year, with a total loss of 25%, against a market gain of about 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 1.0%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with Southwest Airlines , and understanding them should be part of your investment process.

list of growing companies with considerable, recent, insider buying.” data-reactid=”54″>We will like Southwest Airlines better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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