Stock Analysis

Insiders who sold Southwest Airlines Co. (NYSE:LUV) earlier this year probably made the right call as market cap dropped by US$1.6b

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NYSE:LUV
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Insiders seem to have made the most of their holdings by selling US$193k worth of Southwest Airlines Co. (NYSE:LUV) stock at an average sell price of US$42.32 during the past year. After the stock price dropped 8.0% last week, the company's market value declined by US$1.6b, but insiders were able to mitigate their losses.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for Southwest Airlines

The Last 12 Months Of Insider Transactions At Southwest Airlines

In the last twelve months, the biggest single sale by an insider was when the Independent Director, John Montford, sold US$105k worth of shares at a price of US$45.70 per share. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The silver lining is that this sell-down took place above the latest price (US$31.06). So it may not tell us anything about how insiders feel about the current share price. John Montford was the only individual insider to sell shares in the last twelve months.

John Montford sold a total of 4.55k shares over the year at an average price of US$42.32. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

insider-trading-volume
NYSE:LUV Insider Trading Volume March 14th 2023

I will like Southwest Airlines better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Insider Ownership Of Southwest Airlines

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 0.4% of Southwest Airlines shares, worth about US$66m. While this is a strong but not outstanding level of insider ownership, it's enough to indicate some alignment between management and smaller shareholders.

So What Does This Data Suggest About Southwest Airlines Insiders?

It doesn't really mean much that no insider has traded Southwest Airlines shares in the last quarter. Our analysis of Southwest Airlines insider transactions leaves us cautious. But we do like the fact that insiders own a fair chunk of the company. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. While conducting our analysis, we found that Southwest Airlines has 3 warning signs and it would be unwise to ignore these.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

What are the risks and opportunities for Southwest Airlines?

Southwest Airlines Co. operates as a passenger airline company that provide scheduled air transportation services in the United States and near-international markets.

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Rewards

  • Trading at 50.6% below our estimate of its fair value

  • Earnings are forecast to grow 26.91% per year

Risks

  • Profit margins (2.3%) are lower than last year (6.2%)

  • Large one-off items impacting financial results

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