Long-established in the Travel & Leisure industry, Royal Caribbean Group (RCL, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 4.5%, juxtaposed with a three-month change of -14.53%. 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 Royal Caribbean Group.
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: 1/10
- GF Value rank: 8/10
- Momentum rank: 6/10
Based on the above method, GuruFocus assigned Royal Caribbean Group the GF Score of 66 out of 100, which signals poor future outperformance potential.
Understanding Royal Caribbean Group Business
Royal Caribbean Group, with a market cap of $22.23 billion, operates 64 ships across five global and partner brands in the cruise vacation industry. The company, which has 10 more ships on order through 2026, competes on the basis of innovation, quality of ships and service, variety of itineraries, choice of destinations, and price. It also has a 50% investment in a joint venture that operates TUI Cruises and Hapag-Lloyd Cruises. The company's sales stand at $12.01 billion with an operating margin of 11.4%.
Financial Strength Breakdown
Royal Caribbean Group's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0.91 positions it worse than 85.16% of 566 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-Scoreis just 0.64, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years.
Growth Prospects
A lack of significant growth is another area where Royal Caribbean Group seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -12.7 per year over the past three years, which underperforms worse than 73.22% of 758 companies in the Travel & Leisure industry. Stagnating revenues may pose concerns in a fast-evolving market.
Conclusion
Considering the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. The company's low financial strength rank, profitability rank, and growth rank indicate that it may struggle to maintain its historical performance. Therefore, investors should exercise caution when considering this stock.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
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.
