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 that the stock is overvalued. The company exhibits a P/E ratio of 38, which is significantly higher than its peers, such as Delta Air Lines, Inc. at 10.73 and United Airlines Holdings, Inc. at 8.92. Additionally, the EV to EBITDA ratio stands at 11.42, while the PEG ratio is a more favorable 0.77, suggesting that growth expectations may not justify the current price level.
In comparison to the S&P 500, Southwest Airlines has shown mixed performance, with a 1-year return of 11.40% compared to the index's 14.08%, and a stark underperformance over 3 and 5 years, with returns of 2.44% and -15.52%, respectively. This trend reinforces the notion that the stock may not be a compelling investment at its current valuation.