Royal Caribbean Cruises Ltd. (RCL) is a cruise company that operates cruises under the Royal Caribbean International, Celebrity Cruises, and Silversea Cruises brands. Like most tourism segments, cruise travel is strongly rebounding, reaping benefits from “revenge travel,” which should bode well for RCL.
The stock has gained significant momentum lately. RCL closed its last trading session at $87.60, considerably higher than its 50-day moving average of $69.55 and 200-day moving average of $59.23.
However, its stretched valuation is concerning. In terms of forward EV/Sales, it is trading at 3.27x, 188% higher than the industry average of 1.13x, while its forward Price/Sales multiple of 1.70 is 107.1% higher than the industry average of 0.82. In terms of its forward Price/Book, it is trading at 5.50x, 122.3% higher than the 2.48x industry average.
Let’s look at the trends of some of its key financial metrics to understand why it could be wise to wait for a better entry point in the stock.
Tracking Royal Caribbean’s (RCL) Fluctuating Indicators
The data series shows a gradual increase in revenue for RCL, from a low of $21.9 million in March 2021 to a significantly higher $886 million in March 2023. The growth rate between these two points is 305%. There were fluctuations over various periods, including a decrease from June 2022 ($468 million) to September 2022 ($722 million).
The ROA for RCL fluctuated from June 2020, when it was -0.06, to March 2023, when it was -0.03. Over the last two and a half years, the ROA has decreased from -0.06 to -0.031, indicating a growth rate of 48.3%.
The most significant decrease in ROA occurred between September 2020 (-0.129) and December 2020 (-0.177). Despite this downturn, the ROA regained footing and declined steadily until March 2023 (-0.031).
The current ratio of RCL has been fluctuating since June 2020, when it was 0.99. This changed to 0.76 by September 2020; the lowest point of 0.30 was reached in June 2022. The ratio then rose to 0.37 by December 2022 before decreasing again to 0.25 by March 2023.
RCL’s analyst price target has experienced both fluctuations and the trend of growth over the past two years. The price target has seen highs of $89.5 in June 2023 and a low of $58 in September 2022.
Overall, the price target has seen a steady uptrend with an overall growth rate of 34.3%, rising from $58 at the start of the series in November 2021 to $89.5 more recently in June 2023.
Growth of RCL Share Price: December 2022 to June 2023
The trend of RCL share price between December 9, 2022, and June 5, 2023, generally increased, as the share price grew from $57.04 to $87.60. The growth rate has been approximately 8.09% per month since December 2022. Here is a chart of RCL's price over the past 180 days.
Strong Growth and Momentum Ratings for RCL in 2023
RCL has an overall POWR Ratings grade of C, which translates to Neutral, with an overall rank in the Travel - Cruises category of #2 out of 4 stocks. The most recent POWR Ratings grade and rank were both recorded on June 3, 2023.
RCL had the highest POWR Ratings for Growth, Momentum, and Quality. Growth had ratings of 77 in December 2022, 78 in January 2023, 77 in February 2023, 82 in March 2023, 83 in April 2023, 89 in May 2023, and 94 in June 2023.
Momentum had ratings of 54 in December 2022, 58 in January 2023, 58 in February 2023, 70 in March 2023, 74 in April 2023, 82 in May 2023, and 82 in June 2023.
Quality had ratings of 8 in December 2022 and January 2023, 11 in February 2023, 13 in March 2023, 11 in April 2023, 33 in May 2023, and 38 in June 2023. It's clear from these trends that Growth, Momentum, and Quality have all been consistently increasing over time.
How does Royal Caribbean Cruises Ltd. (RCL) Stack Up Against its Peers?
Other stocks in the travel sector that may be worth considering are Bluegreen Vacations Holding Corporation (BVH), Genting Berhad (GEBHY), and Marriott International, Inc. (MAR) -- they have better POWR Ratings.
What To Do Next?
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RCL shares were trading at $90.40 per share on Tuesday afternoon, up $2.80 (+3.20%). Year-to-date, RCL has gained 82.88%, versus a 12.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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