Investors with a long-term horizong may find it valuable to assess Royal Caribbean Cruises Ltd.'s (NYSE:RCL) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Royal Caribbean Cruises is currently performing.
Could RCL beat the long-term trend and outperform its industry?
RCL's trailing twelve-month earnings (from 30 June 2019) of US$1.8b has increased by 7.1% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 25%, indicating the rate at which RCL is growing has slowed down. What could be happening here? Well, let's examine what's occurring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Royal Caribbean Cruises has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 7.4% exceeds the US Hospitality industry of 5.9%, indicating Royal Caribbean Cruises has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Royal Caribbean Cruises’s debt level, has increased over the past 3 years from 7.6% to 9.4%.
What does this mean?
Though Royal Caribbean Cruises's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Royal Caribbean Cruises to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RCL’s future growth? Take a look at our free research report of analyst consensus for RCL’s outlook.
- Financial Health: Are RCL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2019. This may not be consistent with full year annual report figures.
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