Are Investors Undervaluing Carnival (CCL) Right Now?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

Carnival (CCL) is a stock many investors are watching right now. CCL is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 11.26, while its industry has an average P/E of 18.14. Over the past year, CCL's Forward P/E has been as high as 20.07 and as low as 8.45, with a median of 12.91.

CCL is also sporting a PEG ratio of 0.49. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CCL's PEG compares to its industry's average PEG of 0.85. Over the last 12 months, CCL's PEG has been as high as 0.86 and as low as 0.37, with a median of 0.60.

Another valuation metric that we should highlight is CCL's P/B ratio of 2.81. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 6.70. Within the past 52 weeks, CCL's P/B has been as high as 3.55 and as low as 2.09, with a median of 2.78.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CCL has a P/S ratio of 1.04. This compares to its industry's average P/S of 1.1.

Finally, our model also underscores that CCL has a P/CF ratio of 6.05. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 16.47. Over the past 52 weeks, CCL's P/CF has been as high as 8.64 and as low as 4.49, with a median of 6.37.

These are only a few of the key metrics included in Carnival's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, CCL looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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