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 0.08%, juxtaposed with a three-month change of 17.48%. 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: 7/10
- GF Value rank: 2/10
- Momentum rank: 0/10
Based on the above method, GuruFocus assigned Norwegian Cruise Line Holdings Ltd the GF Score of 52 out of 100, which signals poor future outperformance potential.
Understanding Norwegian Cruise Line Holdings Ltd's Business
With a market cap of $8.20 billion and sales of $8.55 billion, Norwegian Cruise Line Holdings Ltd operates as the world's third-largest cruise company by berths, with approximately 66,500. It operates 32 ships across three brands — Norwegian, Oceania, and Regent Seven Seas — offering both freestyle and luxury cruising. The company redeployed its entire fleet as of May 2022. With five passenger vessels on order among its brands through 2028, representing 16,000 incremental berths, Norwegian is increasing capacity faster than its peers, expanding its brand globally. Norwegian sails to around 700 global destinations.
Financial Strength Breakdown
Norwegian Cruise Line Holdings Ltd's financial strength indicators present some concerning insights about the company's balance sheet health. The interest coverage ratio of 1.28 positions it worse than 80.83% of 600 companies in the Travel & Leisure industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 0.06, which is below the distress zone of 1.81, suggesting that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.03 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 46.74, which is worse than 99.28% of 696 companies in the Travel & Leisure industry, suggesting over-reliance on borrowing and vulnerability to market fluctuations. Furthermore, the company's debt-to-Ebitda ratio is 7.93, which is above Joel Tillinghast's warning level of 4 and is worse than 79.01% of 624 companies in the Travel & Leisure industry.
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. The company's financial health appears precarious, and its valuation metrics do not bode well for future growth prospects. Investors should be cautious and may want to look for companies with stronger financials and higher GF Scores. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
As value investors, it's crucial to assess whether the current challenges are temporary or indicative of deeper issues. Will Norwegian Cruise Line Holdings Ltd navigate through these turbulent financial waters, or will it succumb to the pressures? The answer lies in the company's ability to adapt and innovate in an ever-changing industry landscape.
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.
