Long-established in the Travel & Leisure industry, Norwegian Cruise Line Holdings Ltd (NCLH, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 0.3%, juxtaposed with a three-month change of 18.69%. However, 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: 1/10
- 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 64 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 $8.67 billion and sales of $8.08 billion, operates as the world's third-largest cruise company by berths, managing 31 ships across three brands (Norwegian, Oceania, and Regent Seven Seas). The company, known for both freestyle and luxury cruising, 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 Cruise Line Holdings Ltd is expanding its capacity faster than its peers and extending its global brand reach. The company sails to approximately 700 global destinations, showcasing its expansive operational scale.
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 88.96% of companies in the Travel & Leisure industry, indicating potential challenges in managing interest expenses on debt. The company's Altman Z-Score of just 0.05 falls below the distress zone threshold, suggesting a risk of financial distress in the near future.
The low cash-to-debt ratio of 0.05 and a debt-to-equity ratio of 31.63, which is higher than 99.56% of peers, reflect a precarious reliance on borrowing. Moreover, the debt-to-Ebitda ratio of 10.18 exceeds the cautionary level set by Joel Tillinghast, indicating a potential red flag for the company's debt management.
Growth Prospects
The growth outlook for Norwegian Cruise Line Holdings Ltd is not promising, as indicated by its low Growth rank. The company's revenue has declined by an average of 27.2% per year over the past three years, which is worse than 87.3% of companies in the Travel & Leisure industry. This decline in revenue is a significant concern in a rapidly evolving market. Furthermore, the company's predictability rank of one star out of five adds to the uncertainty faced by investors regarding the consistency of revenue and earnings.
Next Steps
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. Investors should be cautious and may want to look for companies with stronger financial health, more robust growth prospects, and better valuations. For those seeking to make informed investment decisions, GuruFocus Premium members can explore 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.
