The average target price of RCL is 258 and suggests 17% downside potential. Usually, this means a SELL recommendation among investment firms, or a recommendation to decrease one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 330.0. This translates into 7% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 200.0. This is equivalent to 35% downside potential in the worst case. 

Royal Caribbean Cruises Ltd. operates as a cruise company worldwide. The company operates cruises under the Royal Caribbean International, Celebrity Cruises, Azamara, and Silversea Cruises brands, which comprise a range of itineraries that call on approximately 1,000 destinations. As of February 25, 2022, it operated 61 ships. The company was founded in 1968 and is headquartered in Miami, Florida.

Royal Caribbean Cruises Ltd.

Consumer Cyclical

The company pays dividends from time to time. It has paid dividends in less than half the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been low and below its peers. On average, the company pays dividends annually. 

RCL reported revenue of USD 16 756mn in the last 12 months, up 2% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 12% from FY24 to USD 12.27.

Over the past six months, the stock has consistently climbed, resulting in 18% total increase. When compared to its international counterparts in the same sector and industry (as shown above), the stock has exceeded their performances, leading by 17ppts in total. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is mildly favourable.

The company has reported modest EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 37.6% in the last 12 months, up from 32.8% in FY23. 

Historically, RCL has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 19.4%, a growth from 12.2% in FY23. 

Royal Caribbean Cruises Ltd. reported a return on equity (RoE) of 51.2% in the last 12 months, up from 44.7% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 8.9% in the last 12 months, an increase from 4.9% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 12.3%, above the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.2 in the past several years. This ratio implies a weak shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

RCL boasts very high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth and solid return on capital, among the positive credit factors. Among the negative credit factors, we point to bleak profitability, weak debt servicing capacity, inadequate interest coverage, and an unfavourable capital structure.

In highly turbulent market conditions, RCL is moderately volatile. In other words, the stock will fall more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be moderate. 

In normal market circumstances, RCL is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from large to notable. 

Based on key historical and expected multiples, the stock is greatly overvalued relative to its peers. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITDA, overvalued on P/FCF. 

Royal Caribbean Cruises Ltd.

$ 284.34

4

Royal Caribbean Cruises Ltd.

$ 284.34

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 284.34

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