Long-established in the Travel & Leisure industry, Norwegian Cruise Line Holdings Ltd (NCLH, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.75%, juxtaposed with a three-month change of 14.6%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Norwegian Cruise Line Holdings Ltd.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 3/10
- Profitability rank: 6/10
- Growth rank: 1/10
- GF Value rank: 4/10
- Momentum rank: 8/10
Based on the above method, GuruFocus assigned Norwegian Cruise Line Holdings Ltd a GF Score of 64 out of 100, which signals poor future outperformance potential.
Understanding Norwegian Cruise Line Holdings Ltd's Business
Norwegian Cruise Line Holdings Ltd, with a market cap of $7.89 billion and sales of $8.08 billion, operates as the world's third-largest cruise company by berths, managing 31 ships across three brands. The company, which boasts an operating margin of 6.5%, has successfully redeployed its entire fleet as of May 2022. With plans to expand capacity through six passenger vessels on order among its brands through 2028, Norwegian Cruise Line Holdings Ltd is set to grow its global presence, sailing to around 700 destinations worldwide.
Financial Strength Breakdown
Norwegian Cruise Line Holdings Ltd's financial strength indicators present some concerning insights about the company's balance sheet health. With an interest coverage ratio of 0.74, it stands worse than 89.04% of companies in the Travel & Leisure industry. This ratio, which is far below Benjamin Graham's preferred minimum of five, highlights potential challenges in managing interest expenses on outstanding debt.
The company's Altman Z-Score is a mere 0.03, indicating a high risk of financial distress in the near future. Moreover, a low cash-to-debt ratio of 0.05 and a debt-to-equity ratio of 31.63, which is higher than 99.57% of its industry peers, suggest an over-reliance on borrowing. The company's debt-to-Ebitda ratio of 10.18 further exacerbates the concern, surpassing Joel Tillinghast's warning level of 4.
Growth Prospects
The growth outlook for Norwegian Cruise Line Holdings Ltd is not promising, as reflected by its low Growth rank. The company's revenue has seen an annual decline of 27.2% over the past three years, a performance worse than 87.39% of companies in the Travel & Leisure industry. This decline in revenue is a troubling sign in a rapidly evolving market.
Furthermore, Norwegian Cruise Line Holdings Ltd's predictability rank is just one star out of five, which adds to the uncertainty regarding the consistency of revenue and earnings.
Next Steps
Considering Norwegian Cruise Line Holdings Ltd's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors seeking to allocate their capital wisely should weigh these factors heavily. For those looking for more robust investment opportunities, GuruFocus Premium members can explore companies with strong GF Scores using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
