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Stock Analysis Royal Caribbean Cruise

Summary

The company’s share ought to be bought owing to the correct and succinct performance that it has indicated over the past years.

Analysis

The stock price of the Royal Caribbean cruise fell in the past week by a 6.05 percent. The reduction in the prices of the stock came after the company reported the earning that were against the expectations and projections made by the experts. The earning per share was expected to be at 10 cents to 15 cents below the anticipated earnings that the experts expected. For the fourth quarter, the company had offer and adjusted earnings per share of 32 cents above the anticipated 23 cents, however, the adjustment was an n undershot of the anticipated 41 cents.

The prediction was an improvement from the past year but is not improving enough to be able to convince the shareholders to hold on the stock. Due to the seemingly poor performance of the company in the stock market, the share price decline by the aforementioned percentage. The projected earnings of the company was supposed to be 1.88 billion but it undershot the target and settled for 1.82 billion (Bloomberg, 2015).

The company increased the full year earnings per share to a range of over 4.65 to 4.85 this was an improvement from the anticipated performance level of 4.55 in the previous year. Ratings place the ratings of the cruise ships operator’s potential as a buy share since there is marked improvement from the previous performance of the company (Bloomberg, 2015). The ratings of the company as a buy stock comes from the promise that the company has in terms of the improving earnings per share.

The ratings of the company as a buy also comes from the convergence of the indicators of positivism. The company has the measures of convergence that help it outdo the rest of the stocks in the market. The company has witnessed a revenue growth in the past years hence the increment of the value and earning per share of the company’s shares. Most stock area performances that lead to the rating of the company as a buy includes the increased growth for revenue, the consistent and solid performance of the stock over the years, the impressive performance of the earnings per share whereby the company has indicated massive developments in terms of the development of the net income. The attractive valuation levels of the company also make it an ideal buy share. In as much as there are not perfect indicators of the company’s performance, the company’s weaknesses are not significant enough to create the worry in terms of the e performance viability.

In depth analysis

The rise of the company has been informed by the strong earnings growth of over 1533.33%. The company’s performance is also informed by other factors. The stock price has also surged by 52.2% in the previous year’s hence the out performance of the rise in the S&P index. The rise of the stock is promising continued development even though any stock is bound to fall at one point or the other. The growth of the company’s stock will persist in as much as the company has enjoyed a continued growth and development in the past years.

The company indicated improvement of the earnings per share in the recent quarter compared to the earnings posted before in the same quarter (Bloomberg, 2015). The company has been indicating a patter that points out to the development of the most positive development in the previous years. The trend of continued earnings per share will be persisting into the future hence the optimism regarding the value of the stock.

The company has also overshot the S&P 500 indicators of the income growth with the company’s performance overshooting the previous performance of the industry in which it operates (Bloomberg, 2015). The positive indicators of the share price has led to the creation of more optimism over the future of the company in terms of the performance levels. The company posted a cash flow growth rate of 0.13% in the years hence the increased times over the continued growth of the industry.

Industry analysis

In order to understand the position of the company, it is important to consider how it is faring in comparison to the rest of the players in the market. The industry consists of hotels, clubs, casinos and theme parks. The demand of the services offered in the industry is dependent on different factors that are applicable all across the industry. Factors that determine the increased spending on the products in the hotel and travel industry include the personal income levels, the consumer confidence, and the total level of income, the weather conditions and the threats of terror attacks (Bloomberg, 2015).

The performance of the industry is impressive with the majority of the players in it indicating performance growth. The food service industry is one of the leading employers in the United States after the government. The industry is indicating continued growth is the rise in the levels of disposable incomes that the consumers have. There is also development of tow income households whereby there are two breadwinners. The increased family’s disposable income is a major contributor towards the increased affordability of the performance of the entire industry (Bloomberg, 2015).

Summary of the stock performance

The stock has attained the growth of 60 percent with the performance of the stock being better than the rest of the players in the industry. It is more profound in the performance than the rest of the operators in the tourism industry that rely on use of sea going vessels. The company has indicted continued growth and development of the entire cash flows and income statement by 60 percent hence the company will continue to offer strong returns on investment to the investors that purchase the stock.

The company has also been able to indicate increased growth in the total return. The company has managed to post continued growth of the stock returns over the two years. The movement of the prices of the stock has been growing with the occasional slumps. Therefore, it has indicated a strong performance with the prospects of growth continues owing to the industry wide factors such as the increased incomes of the households and the commitment of the increased incomes in the hotel industry (Morning star, 2015).

The company has also been able to indicate a positive return on the invested capital. The company has indicated the efficiency level of 50 percent above the rest of the players in the hotel and tourism industry. It has also indicated continued growth and development of the use of the capital levels hence the proper performance and the increased investors’ confidence in the performance of the stock in the coming years. Their capital use efficiency is one of the main motivators for the development of the investors’ confidence in the stock.

The other motivator for the selection of the company as an ideal buy is the indicated level of volatility. Compared to the rest of the stocks in the industry, the stock does not have high volatility (Morning star, 2015). It posts a volatility level of 14%. Therefore, the stock officers stable investment. It is however advised to purchase the stock for holding purposes and not speculation since the changes in the prices will not be moving in the anticipated levels for the speculative investment. The volatility of the share price is low enough for the investment in the stock as a secure investment for the long terms investor.

The company also has a high rate of solvency. This means that the company can meet the obligations that it has to the consumers. It has solvency ratios that are higher than 80 percent of its peers in the market.

Financial analysis

After conduction of the financial analysis of the company, it was evident that the gross profit margin indicated by the company remained unchanged in the previous year with the comparison of the performance of the same rating in the last year. In as much as the company as indicated decreases in the sales, it has conversely indicated a rise in the net income level. The increase is representative of the increases in the bottom-line (Morning star, 2015). Therefore, the performance of the company is indicative of the ability to meet the needs of the market. The decisive test ration of the company is at 0.02 hence the positive solvency of the company.

References

Bloomberg,. (2015). ROYAL CARIBBEAN CRUISES LTD (RCL:New York): Financial Statements - Businessweek.
Morning star,. (2015). Growth, Profitability, and Financial Ratios for Royal Caribbean Cruises Ltd (RCL)