Looking into the current session, Southwest Airlines Inc. LUV shares are trading at $35.47, after a 3.83% spike. Moreover, over the past month, the stock went up by 6.55%, but in the past year, fell by 30.69%. Shareholders might be interested in knowing whether the stock is undervalued, even if the company is performing up to par in the current session.

The stock is currently above from its 52 week low by 57.89%. Assuming that all other factors are held constant, this could present itself as an opportunity for investors trying to diversify their portfolio with Airlines stocks, and capitalize on the lower share price observed over the year.

The P/E ratio is used by long-term shareholders to assess the company’s market performance against aggregate market data, historical earnings, and the industry at large. A lower P/E indicates that shareholders do not expect the stock to perform better in the future, and that the company is probably undervalued. It shows that shareholders are less than willing to pay a high share price, because they do not expect the company to exhibit growth, in terms of future earnings.

Depending on the particular phase of a business cycle, some industries will perform better than others.

Compared to the aggregate P/E ratio of 25.91 in the Airlines industry, Southwest Airlines Inc. has a higher P/E ratio of 100.47. Shareholders might be inclined to think that Southwest Airlines Inc. might perform better than its industry group. It’s also possible that the stock is overvalued.

P/E ratio is not always a great indicator of the company's performance. Depending on the earnings makeup of a company, investors may not be able to attain key insights from trailing earnings.