Carnival Corporation & plc (NYSE:CCL) Looks Inexpensive After Falling 29% But Perhaps Not Attractive Enough

The Carnival Corporation & plc (NYSE:CCL) share price has fared very poorly over the last month, falling by a substantial 29%. Longer-term, the stock has been solid despite a difficult 30 days, gaining 18% in the last year.

After such a large drop in price, considering around half the companies operating in the United States' Hospitality industry have price-to-sales ratios (or "P/S") above 1.6x, you may consider Carnival Corporation & as an solid investment opportunity with its 1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Carnival Corporation &

How Carnival Corporation & Has Been Performing

Carnival Corporation &'s revenue growth of late has been pretty similar to most other companies. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Carnival Corporation & will help you uncover what's on the horizon.

How Is Carnival Corporation &'s Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Carnival Corporation &'s is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 16% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 3.9% per annum during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 13% per year, which is noticeably more attractive.

With this information, we can see why Carnival Corporation & is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Carnival Corporation &'s P/S has taken a dip along with its share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Carnival Corporation & maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 1 warning sign for Carnival Corporation & that you should be aware of.

If these risks are making you reconsider your opinion on Carnival Corporation &, explore our interactive list of high quality stocks to get an idea of what else is out there.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.