Use Southwest
Airlines Enterprise Value PEG Model below . Complete a case study of relative valuation. Analyze the
value of your subject company compared to average industry [e.g., XLF] and
cohort (2-4 comparable companies) values.

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Present Relative Valuation (Valuation by Comparables) –

1. Use appropriate relative valuation models and conduct a Valuation by
Comparables of the company that you selected to study. Select a
meaningful Return Ratio and Price Ratio or multiple. Consider using the
most recent 3-5 annual or quarterly periods with mean/median and standard
deviation. [Keep in mind you have a worksheet from Analysis Paper 1 that can be
used/revised.]

How do you interpret and explain the results? Why did you choose the
ratios used for the comparison?

Present Enterprise Value and EV / EBITDA Ratio –

2. Post the results of the Enterprise Value of Southwest Airlines, along with
its EV/EBITDA ratio, P/E Ratio, and PEG Ratio, along with those of a few
competitors. Use normalized values – mean/median and standard deviation for
industry [e.g., XLF] and cohort.

What do the results mean?

Enterprise Value/EBITDA and PEG Ratio
Source of Data: MSN.com Data As Of: 24-May-18
FIRM NAME(S) AAL ALK UAL DAL LUV Average
COMMON STOCK OUTSTANDING 468.2 123.3 227.3 698.9 579.8 419.5 Number of Shares (Diluted Weighted Average)
RECENT SHARE PRICE \$43.56 \$59.87 \$70.47 \$54.40 \$51.21 \$55.90 Current Stock Price
TOTAL DEBT \$24,740.0 \$2,580.0 \$14,960.0 \$9,710.0 \$3,227.0 \$11,043.4 L/T, S/T & Current Portion of L/T
TOTAL CASH AND LIQUID INVESTMENTS \$5,066.0 \$1,620.0 \$6,352.0 \$2,491.0 \$1,495.0 \$3,404.8 Cash & S/T Investments
EBITDA \$4,053.0 \$1,521.0 \$5,258.0 \$9,934.0 \$4,546.0 \$5,062.4 Normalized EBITDA
NET INCOME \$1,919.0 \$1,030.0 \$2,180.0 \$3,560.0 \$3,488.0 \$2,435.4 Net Income
L/T GROWTH RATE 11.51% 12.90% 19.60% 12.90% 21.10% 15.60% Earnings Growth Rate – Next 5 years
COMPUTER-GENERATED CALCULATIONS
COMPANY AAL ALK UAL DAL LUV Average
MARKET CAPITALIZATION \$20,392.6 \$7,379.6 \$16,015.4 \$38,019.1 \$29,691.7 \$22,299.7
ENTERPRISE VALUE \$40,066.6 \$8,339.6 \$24,623.4 \$45,238.1 \$31,423.7 \$29,938.3
EV/EBITDA RATIO 9.89 5.48 4.68 4.55 6.91 6.30
P/E RATIO 10.63 7.16 7.35 10.68 8.51 8.87
PEG RATIO 0.92 0.56 0.37 0.83 0.40 0.62