Southwest Airlines Company (LUV)
Return on total capital
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 321,000 | 224,000 | 1,017,000 | 1,721,000 | -3,816,000 |
| Long-term debt | US$ in thousands | — | — | — | — | — |
| Total stockholders’ equity | US$ in thousands | 10,350,000 | 10,515,000 | 10,687,000 | 10,414,000 | 8,876,000 |
| Return on total capital | 3.10% | 2.13% | 9.52% | 16.53% | -42.99% |
December 31, 2024 calculation
Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $321,000K ÷ ($—K + $10,350,000K)
= 3.10%
Southwest Airlines Company's return on total capital has shown significant fluctuations over the past five years. Starting at a negative 42.99% in December 2020, the company managed to turn around its performance and achieve a return on total capital of 16.53% by December 2021. However, there was a decline in this metric in the following years, with values of 9.52% in December 2022, 2.13% in December 2023, and a slight improvement to 3.10% by December 2024.
The negative return on total capital in 2020 indicates that the company's capital resources were not efficiently utilized to generate profits. The subsequent improvement in 2021 suggests that Southwest Airlines implemented strategies to enhance its capital efficiency. However, the declining trend in the following years indicates potential challenges in maintaining consistent profitability relative to the capital employed.
To further understand the factors influencing this metric, a deeper analysis of Southwest Airlines' financial performance, investment decisions, cost management strategies, and overall operational efficiency would be necessary.
Peer comparison
Dec 31, 2024