Is Southwest Airlines Co. overvalued or undervalued?

As of 17 October 2025, the valuation grade for Southwest Airlines Co. has moved from fair to expensive, indicating a shift towards overvaluation. The company appears overvalued based on key metrics, including a P/E ratio of 38, a Price to Book Value of 3.10, and an EV to EBITDA of 11.42. In comparison, Delta Air Lines, Inc. has a P/E ratio of 10.73 and United Airlines Holdings, Inc. shows a P/E of 8.92, highlighting that Southwest Airlines is trading at a significant premium relative to its peers.
Recent stock performance shows that while Southwest Airlines has outperformed the S&P 500 in the short term, with a 1-week return of 7.13% compared to the S&P 500's 1.70%, it has significantly lagged over longer periods, with a 5-year return of -15.52% versus the S&P 500's 91.29%. This trend reinforces the notion that the stock may be overvalued given its lack of long-term appreciation relative to the broader market.