If I had to favor one cruise ship operator, I’d pick Carnival Corporation (NYSE:CCL) – but only as the least bad of the crowd. Carnival is the largest of the three and has a market cap of $26 billion. It has a current P/E of 17.8x. It’s financial condition has actually been fairly consistent over the past five years. However, its current ratio still comes in weak at 0.30. One somewhat redeeming item on Carnival Corporation (NYSE:CCL)’s balance sheet is its lower debt to equity ratio. At 0.40 it’s not great, but better than Royal’s and Norwegian’s, which are at 1.02 and 1.11, respectively.
The rising debt and decreasing liquidity on Royal Caribbean Cruises Ltd. (NYSE:RCL)’s balance sheet are hallmarks of deteriorating financial condition and reason for concern. Since Royal’s closest competitors, Norwegian and Carnival, are also showing signs of duress, it may be that the cruise line business at large is facing headwinds. Be that as it may, among the three, Royal looks to be the deepest into troubled waters. While some may stay aboard and hope that Royal will turn the ship around, I think it’s time to set sail and hit the sell button.
Victor Lai has no position in any stocks mentioned. Victor Lai is an investment adviser representative with Bellwether Capital Management LLC, a registered investment adviser. Victor Lai does not own any positions in the securities referenced in this posting. Clients of Bellwether Capital Management LLC may own positions in the securities referenced in this post. This post is for informational purposes only and does not represent advice. You should conduct proper due diligence and/or consult with professional advisors before taking investment action.
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The article Sail Away From Royal Caribbean originally appeared on Fool.com and is written by Victor Lai.
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