Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) Stock Rockets 27% But Many Are Still Ignoring The Company

Despite an already strong run, Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) shares have been powering on, with a gain of 27% in the last thirty days. Looking further back, the 16% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, Norwegian Cruise Line Holdings may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 11.9x, since almost half of all companies in the United States have P/E ratios greater than 19x and even P/E's higher than 34x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

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Recent times have been advantageous for Norwegian Cruise Line Holdings as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Norwegian Cruise Line Holdings

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Norwegian Cruise Line Holdings.

What Are Growth Metrics Telling Us About The Low P/E?

In order to justify its P/E ratio, Norwegian Cruise Line Holdings would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings growth, the company posted a terrific increase of 141%. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the analysts covering the company suggest earnings should grow by 11% per year over the next three years. That's shaping up to be similar to the 10% per annum growth forecast for the broader market.

With this information, we find it odd that Norwegian Cruise Line Holdings is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Norwegian Cruise Line Holdings' P/E

The latest share price surge wasn't enough to lift Norwegian Cruise Line Holdings' P/E close to the market median. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Norwegian Cruise Line Holdings currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

Plus, you should also learn about this 1 warning sign we've spotted with Norwegian Cruise Line Holdings.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.