Long-established in the Travel & Leisure industry, Norwegian Cruise Line Holdings Ltd (NCLH, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 2.75%, juxtaposed with a three-month change of 28.52%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Norwegian Cruise Line Holdings Ltd.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 3/10
- Profitability rank: 6/10
- Growth rank: 2/10
- GF Value rank: 4/10
- Momentum rank: 8/10
Based on the above method, GuruFocus assigned Norwegian Cruise Line Holdings Ltd a GF Score of 66 out of 100, which signals poor future outperformance potential.
Understanding Norwegian Cruise Line Holdings Ltd's Business
Norwegian Cruise Line Holdings Ltd, with a market cap of $7.90 billion and sales of $8.08 billion, operates 31 ships across three brands (Norwegian, Oceania, and Regent Seven Seas), offering both freestyle and luxury cruising. The company, which sails to around 700 global destinations, had redeployed its entire fleet as of May 2022. With six passenger vessels on order among its brands through 2028 (representing 16,500 incremental berths), Norwegian is increasing capacity faster than its peers, expanding its brand globally. However, the company's operating margin stands at 6.5%, reflecting the competitive and capital-intensive nature of the cruise industry.
Financial Strength Breakdown
Norwegian Cruise Line Holdings Ltd's financial strength indicators present some concerning insights about the company's balance sheet health. With an interest coverage ratio of 0.74, it is positioned worse than 88.83% of 600 companies in the Travel & Leisure industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Score is just -0.01, indicating a risk of financial distress, and its low cash-to-debt ratio at 0.05 suggests difficulties in managing debt levels. Furthermore, a debt-to-equity ratio of 31.63 and a debt-to-Ebitda ratio of 10.18 exacerbate concerns about the company's financial leverage and ability to withstand economic downturns.
Growth Prospects
The company's growth trajectory is also under scrutiny. Norwegian Cruise Line Holdings Ltd's Growth rank is a mere 2/10, with a three-year revenue decline of -27.2% per year, underperforming 88.01% of 767 companies in the Travel & Leisure industry. This stagnation in revenue is a red flag in a rapidly evolving market. Moreover, a predictability rank of one star out of five adds to investor uncertainty regarding the consistency of revenue and earnings.
Conclusion: The Road Ahead for Norwegian Cruise Line Holdings Ltd
Considering Norwegian Cruise Line Holdings Ltd's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. The company's high debt levels, weak interest coverage, and negative growth trends paint a challenging picture for future outperformance. Investors seeking more robust investment opportunities may consider exploring companies with stronger GF Scores. GuruFocus Premium members can find such companies using the GF Score Screen.
As value investors, it's crucial to ask: Will Norwegian Cruise Line Holdings Ltd navigate through these financial and growth headwinds, or will it be anchored down by its current challenges? The answer may lie in the company's ability to adapt and innovate in the face of industry disruptions and economic pressures.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
