Is It Time to Reassess Carnival Stock After Its Three Year 194% Surge?

• If you have ever wondered whether Carnival Corporation & is still a bargain after its big recovery story, you are in the right place. We are going to walk through what the current price really implies about its value.
• The stock has slipped 2.3% over the last month and is roughly flat over the past year at a 1.2% loss, but zooming out to three years it is still up 194.3%. This indicates that sentiment has already shifted significantly from the lows.
• That reversal has been underpinned by steadily improving travel demand, with cruise bookings and pricing power generally trending higher across the industry, as more consumers return to longer holidays at sea. At the same time, investors have been watching how companies like Carnival handle balance sheet repair and refinancing in a higher rate environment, which helps explain some of the volatility around the recent pullback.
• Right now, Carnival scores a solid 5 out of 6 on our valuation checks. This suggests the market may still be underestimating parts of the story. Next we will break down what different valuation methods say about the stock, before finishing with a more holistic way to think about value that goes beyond any single model.

Carnival Corporation & delivered -1.2% returns over the last year. See how this stacks up to the rest of the Hospitality industry.

Approach 1: Carnival Corporation & Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today in $ terms. For Carnival Corporation &, the model used is a 2 Stage Free Cash Flow to Equity approach built on cash flow projections.

Carnival recently generated about $1.46 billion in Free Cash Flow, and analysts expect this to rise meaningfully over time, with projections reaching roughly $3.94 billion by 2029. Beyond the first five years of analyst estimates, further annual cash flows out to 2035 are extrapolated to reflect a maturing growth profile, with Free Cash Flow remaining in the multi billion dollar range.

When all those projected cash flows are discounted back to today, Simply Wall St estimates an intrinsic value of about $30.28 per share. Compared with the current share price, this implies the stock is around 13.2% undervalued on a DCF basis, which suggests the market is not fully pricing in the recovery in cash generation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Carnival Corporation & is undervalued by 13.2%. Track this in your watchlist or portfolio, or discover 909 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Carnival Corporation &.

Approach 2: Carnival Corporation & Price vs Earnings

For profitable companies like Carnival, the price to earnings ratio is a useful yardstick because it directly links what investors pay today to the profits the business is generating. A higher PE can sometimes be associated with stronger growth prospects and lower perceived risk, while slower growth or higher uncertainty usually aligns with a lower, more conservative multiple.

Carnival currently trades on a PE of about 13.1x, which is well below both the Hospitality industry average of roughly 23.6x and the broader peer group average of around 21.2x. Simply Wall St also calculates a Fair Ratio of 26.4x, a proprietary estimate of what Carnival’s PE could be once factors like its earnings growth outlook, profit margins, industry positioning, market cap and company specific risks are taken into account. This tailored Fair Ratio can be more informative than a simple peer or industry comparison because it adjusts for the nuances of Carnival’s own fundamentals rather than assuming all companies deserve the same multiple.

With Carnival’s actual PE of 13.1x sitting well below the Fair Ratio of 26.4x, the stock currently looks meaningfully undervalued on an earnings multiple basis based on this framework.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Carnival Corporation & Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Carnival Corporation & with the numbers behind it by turning your story about its future revenue, earnings and margins into a financial forecast and fair value estimate that you can easily compare to today’s share price. Narratives on Simply Wall St’s Community page, used by millions of investors, help you lay out your assumptions, link them to a dynamic valuation, and then decide whether the gap between Fair Value and the current Price suggests Carnival might be a buy, hold, or sell for you personally. Because Narratives automatically update when new information such as earnings releases or major news arrives, they stay relevant and can quickly show you whether your thesis still holds. For example, one investor might build a bullish Narrative around expanding Caribbean destinations and improving margins that supports a higher fair value near 43 dollars a share, while a more cautious investor may focus on debt, regulation and macro risks and land closer to 24 dollars, and both perspectives can coexist transparently on the platform so you can decide which story you believe.

Do you think there's more to the story for Carnival Corporation &? Head over to our Community to see what others are saying!

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.

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