Positive Sentiment Still Eludes Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) Following 26% Share Price Slump

To the annoyance of some shareholders, Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 17% share price drop.

After such a large drop in price, Norwegian Cruise Line Holdings may be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 7.6x, since almost half of all companies in the United States have P/E ratios greater than 17x and even P/E's higher than 30x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

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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.

See 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 .

How Is Norwegian Cruise Line Holdings' Growth Trending?

The only time you'd be truly comfortable seeing a P/E as depressed as Norwegian Cruise Line Holdings' is when the company's growth is on track to lag the market decidedly.

If we review the last year of earnings growth, the company posted a terrific increase of 434%. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Turning to the outlook, the next three years should generate growth of 12% per year as estimated by the analysts watching the company. That's shaping up to be similar to the 11% each year 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 Final Word

Having almost fallen off a cliff, Norwegian Cruise Line Holdings' share price has pulled its P/E way down as well. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Norwegian Cruise Line Holdings' analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. 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.

Having said that, be aware Norwegian Cruise Line Holdings is showing 1 warning sign in our investment analysis, you should know about.

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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.