Is Southwest Airlines Co. overvalued or undervalued?

As of 22 August 2025, the valuation grade for Southwest Airlines Co. has moved from fair to expensive. The company appears to be overvalued, particularly when considering its P/E ratio of 38, which is significantly higher than the industry average, and its EV to EBITDA ratio of 11.42, which also suggests a premium valuation compared to peers. The PEG ratio stands at 0.77, indicating that the stock may not be justified at its current price given its growth prospects.
In comparison with key peers, Delta Air Lines, Inc. has a P/E ratio of 10.73, and United Airlines Holdings, Inc. has a P/E of 8.92, both of which highlight the relative overvaluation of Southwest Airlines. Additionally, the company's recent stock performance has been underwhelming, with a year-to-date return of -4.02% compared to the S&P 500's 12.22%, and a 5-year return of -18.98% against the S&P's 96.61%, reinforcing the notion that the stock may not offer attractive value at this time.