The largest cruise company in the world, Carnival Corporation (NYSE:CCL), is trading 9.98% lower from where it started in 2013, a rarity in this bull market.
The company operates about 100 cruise ships and tour companies in Alaska and Canada. Based on market capitalization, Carnival Corporation (NYSE:CCL) is valued at $26.73 billion, and the stock carries a price to book ratio of 1.13. Currently, the company carries a TTM profit margin of 9.58%.
With Carnival Corporation (NYSE:CCL) trading at nearly half of its all time-highs, is the company a bargain in this inflated market, or should investors look for a different company to set sail on?
Historic Revenue Growth:
In 2003, Carnival Corporation (NYSE:CCL) reported revenue of $6.71 billion; in 2012, the company announced revenue of $15.38 billion, representing year over year annual growth of 9.65%, a strong trend that should continue into the future, with projections placing 2015 revenue at $18.35 billion. This growth has been a result of multiple mergers and a rapidly growing fleet.
Institutional Vote of Confidence: 79% of shares outstanding are held by institutional investors, representing over $17 billion in investment, displaying the confidence some of largest investors in the world have in the company and its future.
Leading Industry Position: Carnival is more than double the size of its biggest competitor, operates 100 ships with an estimated capacity of over 200,000 passengers, and employs 85,400 people. With this leading market position and established nature comes a greater level of security and predictability for investors.
Reasonable Valuation: At the moment, the company carries a price to earnings ratio of 17.49, a price to book ratio of 1.13, and a price to sales ratio of 1.68; all of which indicate a company trading with fairly reasonable valuations.
Cash Flow Position: In 2012, Carnival Corporation (NYSE:CCL) generated $2.82 billion in cash flow, allowing the company to pay out its dividend yielding 3.02%
Net Debt: The company’s $465 million in cash and cash equivalents is outweighed by its $7.16 billion debt load, resulting in a net debt of $6.69 billion, accounting for 23.44% of market capitalization, a major financial weakness of the company.
Margin Contraction: Over the past decade, Carnival Corporation (NYSE:CCL)’s TTM profit margin has gradually declined, representing a substantial weakening in the company’s profitability.
Dividend Growth: Since implementing their dividend program in 1988, Carnival has consistently raised their dividend payouts, and is widely anticipated to do so into the future.