The CEO of Royal Caribbean Cruises Ltd. (RCL)’s Family Trusts Have Been Buying Shares

The second quarter of Carnival’s fiscal year ended in May, with the company recording a slight decline in sales from their levels a year ago. Reported earnings increased, but this was entirely due to smaller unrealized losses on fuel derivatives; in fact, operating income was down. Of course, Carnival also generates most of its annual earnings in the current fiscal quarter.

Carnival actually trades at a premium to Royal Caribbean in terms of expected current year earnings, despite the weaker financials year to date. Its forward earnings multiple of 17 also represents a higher valuation relative to its smaller peer (which is valued at only 12 times forward earnings estimates). The company is larger in terms of market capitalization and does offer a somewhat higher dividend yield (at an annual rate of 2.7%) but those two factors don’t seem to justify this higher pricing given the disadvantages we’ve mentioned.

Of course even with Royal Caribbean the forward earnings multiple isn’t particularly low given the company’s low sales growth. In addition, the stock’s prospects are highly dependent on how this quarter’s financials turn out. While the insider purchase is a plus, investors who are even interested in buying cruise ship companies at all would probably want to wait for the Q3 results before evaluating Royal Caribbean further.

Disclosure: I own no shares of any stocks mentioned in this article.