Southwest Airlines Company (LUV)
Profitability ratios
Return on sales
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Gross profit margin | 18.70% | 20.49% | 8.74% | -28.05% | 30.86% |
| Operating profit margin | 0.87% | 4.36% | 11.19% | -42.18% | 13.19% |
| Pretax margin | 2.45% | 3.12% | 8.61% | -47.04% | 13.19% |
| Net profit margin | 1.80% | 2.31% | 6.35% | -33.97% | 10.26% |
The profitability ratios of Southwest Airlines Co, as indicated by the gross profit margin, operating profit margin, pretax margin, and net profit margin, show fluctuations over the past five years.
The gross profit margin has remained consistently high at 100% across all years, indicating that Southwest Airlines effectively manages its production costs and generates a significant profit on sales.
However, the operating profit margin has varied significantly, with a sharp decline in 2020 and a negative figure indicating losses. This suggests that Southwest faced challenges in controlling its operating expenses and generating profits from its core operations in that particular year.
The pretax margin shows fluctuations as well, with negative values in 2020, and positive values in other years. This indicates that Southwest Airlines faced varying levels of profitability before accounting for taxes, underlining the impact of operating expenses and other financial factors on the company's overall profitability.
The net profit margin, which reflects the company's bottom line profitability after all expenses, also shows fluctuations over the years. The negative net profit margin in 2020 indicates a year of losses, possibly due to extraordinary expenses or economic challenges faced by the company.
In summary, while Southwest Airlines Co has maintained a high gross profit margin, the operating profit margin, pretax margin, and net profit margin have shown varying levels of profitability over the years, indicating the company's performance in managing expenses, generating profits, and navigating economic conditions.
Return on investment
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 0.61% | 2.88% | 4.74% | -11.03% | 11.42% |
| Return on assets (ROA) | 1.27% | 1.52% | 2.69% | -8.89% | 8.88% |
| Return on total capital | 2.13% | 9.52% | 16.53% | -42.99% | 31.28% |
| Return on equity (ROE) | 4.42% | 5.04% | 9.38% | -34.63% | 23.39% |
The profitability ratios of Southwest Airlines Co have exhibited significant variability over the past five years.
1. Operating return on assets (Operating ROA) has fluctuated from negative to positive values, with a high of 11.42% in 2019 and a low of -13.83% in 2020. The ratio decreased from 2.88% in 2022 to 0.61% in 2023, indicating a decline in the company's ability to generate operating profits from its assets.
2. Return on assets (ROA) has also shown inconsistency, with a range of -8.89% in 2020 to 2.69% in 2021. In 2023, the ROA stood at 1.27%, reflecting a moderate return on the company's total assets.
3. Return on total capital has experienced significant fluctuations, with the highest point at 23.66% in 2019 and the lowest at -24.90% in 2020. The ratio decreased from 5.42% in 2022 to 1.21% in 2023, indicating a decline in the company's overall profitability relative to its total invested capital.
4. Return on equity (ROE) has displayed wide variations as well, ranging from -34.63% in 2020 to 23.39% in 2019. The latest ROE in 2023 stood at 4.42%, reflecting the company's ability to generate profits for its shareholders.
Overall, the profitability ratios of Southwest Airlines Co highlight the company's fluctuating financial performance and profitability over the past five years. Further analysis of the company's operational efficiency and financial management strategies may be warranted to understand the underlying factors contributing to these fluctuations.