Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldnt want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value? <\/p>\n
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Lets put Royal Caribbean Cruises Ltd. (RCL - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks. <\/p>\n
PE Ratio <\/p>\n
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stocks current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry\/sector; and c) how it compares to the market as a whole. <\/p>\n
On this front, Royal Caribbean has a trailing twelve months PE ratio of 15.57, as you can see in the chart below: <\/p>\n<\/p>\n
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.49. If we focus on the stocks long-term PE trend, the current level puts Royal Caribbeans PE ratio below its midpoint over the past five years, which is 16.92. Moreover, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels. <\/p>\n
Further, the stocks PE also compares favorably with the Zacks classified Leisure & Recreation Services industrys trailing twelve months PE ratio, which stands at 20.15. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. <\/p>\n<\/p>\n
We should also point out that Royal Caribbean has a forward PE ratio (price relative to this years earnings) of 13.60, so it is fair to say that a slightly more value-oriented path may be ahead for Royal Caribbean stock in the near term too. <\/p>\n
P\/S Ratio <\/p>\n
Another key metric to note is the Price\/Sales ratio. This approach compares a given stocks price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings. <\/p>\n
Right now, Royal Caribbean has a P\/S ratio of about 2.41. This is lower than the S&P 500 average, which comes in at 3.11 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock, in particular over the past year. <\/p>\n<\/p>\n
Broad Value Outlook <\/p>\n
In aggregate, Royal Caribbean currently has a Zacks Value Style Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Royal Caribbean a solid choice for value investors, and some of its other key metrics make this pretty clear too. <\/p>\n
For example, the PEG ratio for Royal Caribbean is just 0.63, a level that is lower than the industrys average of 2.99. The PEG ratio is a modified PE ratio that takes into account the stocks earnings growth rate. Additionally, its P\/CF ratio (another great indicator of value) comes in at 8.63, which is somewhat better than the industry average of 8.70. Clearly, RCL is a solid choice on the value front from multiple angles. <\/p>\n
What About the Stock Overall? <\/p>\n
Though Royal Caribbean might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of C and a Momentum score of C. This gives RCL a Zacks VGM scoreor its overarching fundamental gradeof B. (You can read more about the Zacks Style Scores here >>) <\/p>\n
Meanwhile, the companys recent earnings estimates have been encouraging. The current quarter has seen two upward estimate revisions in the past sixty days, while the full year estimate has seen eight upward revisions in the same time frame. <\/p>\n
As a result, the current quarter consensus estimate has increased by 31.4%, while the full year estimate has inched up by 3.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below: <\/p>\n
Royal Caribbean Cruises Ltd. Price and Consensus <\/p>\n<\/p>\n
Royal Caribbean Cruises Ltd. Price and Consensus | Royal Caribbean Cruises Ltd. Quote <\/p>\n
This positive trend signifies bullish analyst sentiment, and its Zacks Rank #2 (Buy) indicates robust fundamentals and expectations of outperformance in the near term. <\/p>\n
Bottom Line <\/p>\n
Royal Caribbean is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its Zacks Rank #2 also indicates robust growth potential in the near future. However, the companys prospects might be constrained due to adverse broader factors, as it has a sluggish industry rank (Bottom 34% out of more than 250 industries). In fact, over the past one year, the Zacks categorized Leisure & Recreation Services industry has clearly underperformed the broader market, as you can see below: <\/p>\n<\/p>\n
So, it might pay for value investors to delve deeper into the companys prospects, as fundamentals indicate that this stock could be a compelling pick. <\/p>\n
Zacks' Top 10 Stocks for 2017 <\/p>\n
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017? <\/p>\n
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >> <\/p>\n
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Royal Caribbean: Should Value Investors Pick this Stock? - March 7 ... - Zacks.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Value investing is easily one of the most popular ways to find great stocks in any market environment. Continue reading