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Today I will take a look at Royal Caribbean Cruises Ltd.’s (NYSE:RCL) most recent earnings update (31 March 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the hospitality industry performed. As an investor, I find it beneficial to assess RCL’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Did RCL’s recent earnings growth beat the long-term trend and the industry?
RCL’s trailing twelve-month earnings (from 31 March 2019) of US$1.8b has jumped 13% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 27%, indicating the rate at which RCL is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, Royal Caribbean Cruises has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 7.5% exceeds the US Hospitality industry of 6.0%, indicating Royal Caribbean Cruises has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Royal Caribbean Cruises’s debt level, has increased over the past 3 years from 8.1% to 9.6%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 92% to 87% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Royal Caribbean Cruises to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RCL’s future growth? Take a look at our free research report of analyst consensus for RCL’s outlook.
- Financial Health: Are RCL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.