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 peers such as Delta Air Lines, Inc. with a P/E of 10.73 and United Airlines Holdings, Inc. at 8.92. Additionally, the EV to EBITDA ratio stands at 11.42, further suggesting a premium compared to the industry average.
In comparison to its peers, Southwest Airlines Co. has a PEG ratio of 0.77, which is more favorable than Delta's PEG of 10.73, but still reflects a concerning valuation given the overall context. The recent stock performance shows that Southwest Airlines has underperformed against the S&P 500, with a year-to-date return of -11.75% compared to the S&P 500's 16.30%, reinforcing the notion that the stock may be overvalued in the current market environment.