Are Investors Undervaluing Carnival (CCL) Right Now?

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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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.

One stock to keep an eye on is Carnival (CCL). CCL is currently holding a Zacks Rank #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 13.58, while its industry has an average P/E of 15.85. CCL's Forward P/E has been as high as 20.07 and as low as 8.45, with a median of 13.45, all within the past year.

CCL is also sporting a PEG ratio of 0.61. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CCL's PEG compares to its industry's average PEG of 1.13. CCL's PEG has been as high as 0.86 and as low as 0.37, with a median of 0.60, all within the past year.

Another valuation metric that we should highlight is CCL's P/B ratio of 3.56. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 6.49. Within the past 52 weeks, CCL's P/B has been as high as 3.79 and as low as 2.09, with a median of 3.05.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. CCL has a P/S ratio of 1.27. This compares to its industry's average P/S of 1.83.

Finally, our model also underscores that CCL has a P/CF ratio of 8.05. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. CCL's current P/CF looks attractive when compared to its industry's average P/CF of 12.06. Over the past 52 weeks, CCL's P/CF has been as high as 8.64 and as low as 4.49, with a median of 7.39.

These are only a few of the key metrics included in Carnival's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, CCL looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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