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Is Carnival (CCL) Stock Undervalued Right Now?

Zacks Equity Research

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

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) and an A for Value. The stock has a Forward P/E ratio of 11.33. This compares to its industry's average Forward P/E of 17.95. Over the past year, CCL's Forward P/E has been as high as 12.18 and as low as 9, with a median of 10.51.

Investors will also notice that CCL has a PEG ratio of 1.31. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CCL's PEG compares to its industry's average PEG of 1.53. CCL's PEG has been as high as 1.31 and as low as 0.70, with a median of 1.01, all within the past year.

Another notable valuation metric for CCL is its P/B ratio of 1.07. 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 1.32. Over the past 12 months, CCL's P/B has been as high as 1.27 and as low as 0.84, with a median of 1.04.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. 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 1.29. This compares to its industry's average P/S of 1.33.

Finally, we should also recognize that CCL has a P/CF ratio of 6.92. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 9.15. Over the past year, CCL's P/CF has been as high as 7.96 and as low as 5.36, with a median of 6.63.

Value investors will likely look at more than just these metrics, but the above data helps show that Carnival is likely undervalued currently. And when considering the strength of its earnings outlook, CCL sticks out at as one of the market's strongest value stocks.

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