Setting Sail on the High Seas: Carnival Corporation (CCL), Royal Caribbean Cruises Ltd. (RCL)

Three of the biggest cruise liners in the world just happen to be publicly traded, and they’re awaiting your investment. Should you do it though? Well, with the decreasing unemployment rate, salaries back on the rise, and other positive signs out there in the economy, the average consumer may be in the mood to splurge on a nice cruise, and that would translate to increased earnings and more capital gains for you!

The biggest cruise company out there right now is Carnival Corporation (NYSE:CCL). You’ve no doubt seen the endless number of their commercials on TV, and if you live by a major port then there’s a slight chance that you’ve seen one of these ships around. Royal Caribbean Cruises Ltd. (NYSE:RCL) is also right up there with Carnival. If you have ever thought about a cruise, chances are you’ve checked out these two companies. Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) is a lot smaller compared to Carnival and Royal Caribbean, but I think that they may still end up piquing some investor interest.

Carnival

As mentioned, Carnival is the largest of the three stocks. The Carnival market cap at the time of writing is right around the $31.5 billion mark, not too shabby! With them being the biggest, they have to offer cruises around the world, and they do just that. Carnival will let you set sail on a cruise around Canada, Russia, through the Panama Canal, or even a cruise to nowhere. That’s right, some people love sailing so much they hop on one of these boats and go nowhere!

It has to be asked, how’s business at Carnival? I’d definitely say that it has had a bleak past few years, but the future is no doubt looking up. Over the last five years EPS has failed to grow but rather has been showing losses at an annual rate of -8.97%. Revenues over that time period have been increasing, a positive sign for the cruise liner. One thing to make note of about this company is that analysts are calling for some pretty good growth over the next two fiscal years at a rate of around 25% per year. Talk about fighting back!

The market isn’t dumb, though; it already has the growth factored in. The P/E ratio at Carnival is very high at 29.6, which makes it hard to capture any potential short term gains. This stock is definitely for the long haul, something that’s not too bad considering that the company has a 2.6% dividend yield, relatively low debt, a gross margin above 30% and a five-year pre-tax margin of 12.8%.