Is Southwest Airlines Co. overvalued or undervalued?

As of 31 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 its P/E ratio of 38, which is significantly higher than the industry average, and an EV to EBITDA ratio of 11.42, which also suggests a premium valuation compared to peers. Additionally, the PEG ratio stands at 0.77, indicating that the stock may not be justified by its growth prospects.
In comparison to its peers, Delta Air Lines, Inc. has a fair valuation with a P/E of 10.73, while United Airlines Holdings, Inc. is rated very attractive with a P/E of 8.92. This stark contrast highlights the premium Southwest Airlines is trading at relative to its competitors. Furthermore, the company's stock has underperformed against the S&P 500 across multiple periods, with a year-to-date return of -9.88% compared to the S&P 500's 16.30%, reinforcing the notion that the stock may be overvalued.