Royal Caribbean Thrives as People Begin Spending on Travel

Royal Caribbean is a company that provides cruises for people and allows them to relax and enjoy the sites and sounds of the oceans. Now that the economy has recovered and is back at all time highs, people have confidence in the overall economy and are now beginning to travel and allocate money to areas that otherwise would be off limits in a slow or retracting market. These types of stocks tend to be cyclical but certainly are ones to keep an eye on as they can provide great returns when things are going well.

Published over a year ago
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Reviewed by Rifka Kats

Taking a look at a recent 8-K filing, we can see that full year numbers are in and they certainly do not disappoint. Net yields for the full year of 2016 were up 3.9% on a constant-currency basis. Net cruise costs excluding fuel were up 0.9% on a constant-currency basis. US GAAP net income was $1.28 billion or $5.93 per share, versus $665.8 or $3.02 per share in 2015. For current and potential investors, these are the numbers that keep people assured that they have made a sound investment.

Now, switching gears to the chart, we can see that price is about to push the highs of early 2016, which is important to watch because we want to see this resistance level broken on higher volume than it was established on. By looking at the chart, there could be the breakout play to newer highs, or the push back of resistance and formulate a retrace strategy. The chart looks healthy, but by looking at the monthly time frame, these new movement could signal a sideways change.

Typically, a company's financial statements are the reports that show the financial position of the company. There are three main documents that fall into the category of financial statements. These documents include Royal Caribbean income statement, its balance sheet, and the statement of cash flows. Potential Royal Caribbean investors and stakeholders use financial statements to determine how well the company is positioned to perform in the future. Although Royal Caribbean investors may use each financial statement separately, they are all related. The changes in Royal Caribbean's assets and liabilities, for example, are also reflected in the revenues and expenses that we see on Royal Caribbean's income statement, which results in the company's gains or losses. Cash flows can provide more information regarding cash listed on a balance sheet, but not equivalent to net income shown on the income statement. Please read more on our technical analysis and fundamental analysis pages.
The goal of Royal Caribbean fundamental analysis is to do accurate financial forecasts. There are several possible objectives to fundamental analysis, such as projecting of Royal Caribbean performance into the future periods or doing a reasonable stock valuation. The intrinsic value of Royal Caribbean shares is the value that is considered the true value of the share. If the intrinsic value of Royal is higher than its market price, buying is generally recommended. If it is equal to the market price, it is recommended to hold; and if it is less than the market price, then one should sell all shares Royal Caribbean. Please read more on our fundamental analysis page.

How effective is Royal Caribbean in utilizing its assets?

Royal Caribbean Cruises reports assets on its Balance Sheet. It represents the amount of Royal resources that either has an existing economic value or will provide some form of benefits in the future. By effectively utilizing its assets, Royal Caribbean aims to generate revenue, control costs, drive operational efficiency, and enhance profitability. Optimizing asset utilization helps maximize shareholder value and maintain a competitive position in the Hotels, Resorts & Cruise Lines space. To get a better handle on how balance sheet or income statements item affect Royal volatility, please check the breakdown of all its fundamentals.

Are Royal Caribbean Earnings Expected to grow?

The future earnings power of Royal Caribbean involves the interaction of many company-specific, industry, and economic forces. Earnings estimates embody investors' opinions of Royal Caribbean factors such as sales growth, product demand, competitive industry environment, profit margins, and cost controls. Royal Caribbean stock prices adjust as these expectations change or are proven wrong. The main thing to remember is that equities with high expected earnings growth tend to underperform the market because it is usually difficult to meet the market's high expectations. Companies with low earnings expectations tend to do better than expected. Please use our latest analysis of Royal expected earnings.

Royal Caribbean Gross Profit

Royal Caribbean Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Royal Caribbean previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Royal Caribbean Gross Profit growth over the last 10 years. Please check Royal Caribbean's gross profit and other fundamental indicators for more details.

Is Royal Caribbean valued adequately by the market?

Risks

Being in the industry of travel and entertainment, the company is certainly affected by macro economic factors. You can take a look at the most recent 10-K filing for a full list of risks, but here are a couple to watch out for. First, conducting business globally may result in increased costs and other risks. Of course there are international risks, but without being global, the company would lack in size and revenue. Secondly, the report cites fears of terrorist and pirate attacks, war, and other similar situations could cause people to not travel as frequently which will adversely affect the company and the fundamental health.

Conclusion

This is a solid company for the short glance, but keep in mind that the overall economy has a decent impact on how this company performs. However, this could be a solid stock to have when times continue growing, as you can see from the chart. Be sure to conduct your own research and decide if this company is a fit for your portfolio. If you still have questions after your research, consult an investing professional as they can direct you in the right direction and help you with the finer points.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Nathan Young do not own shares of Royal Caribbean Cruises. Please refer to our Terms of Use for any information regarding our disclosure principles.

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