Carnival Corporation Stock Buy Recommendation Reiterated (CCL)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Carnival Corporation (NYSE: CCL) has been reiterated by TheStreet Ratings as a buy with a ratings score of B- . The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The current debt-to-equity ratio, 0.43, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.16 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • CCL, with its decline in revenue, slightly underperformed the industry average of 0.8%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for CARNIVAL CORP/PLC (USA) is currently lower than what is desirable, coming in at 29.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.40% significantly trails the industry average.

Carnival Corporation operates as a cruise and vacation company worldwide. The company has a P/E ratio of 20.8, below the average leisure industry P/E ratio of 26.3 and above the S&P 500 P/E ratio of 17.7. Carnival has a market cap of $22.42 billion and is part of the services sector and leisure industry. Shares are up 15.2% year to date as of the close of trading on Friday.

You can view the full Carnival Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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