Carnival (US:CCL) The Motley Foolยท2025-08-22 08:40Core Viewpoint - Carnival, the world's largest cruise-line operator, is considered undervalued relative to its growth potential despite past challenges during the pandemic [1] Group 1: Growth Recovery - Carnival's stock price has rebounded from a low of below $8 in April 2020 to nearly $30, reflecting a significant recovery post-pandemic [2] - The company experienced a drastic decline in passenger numbers during fiscal 2020 and 2021, but has since seen a resurgence, with passenger growth of 542% in 2022 and 62% in 2023 [4][5] Group 2: Revenue and Market Expansion - Analysts project Carnival's revenue to reach $26.5 billion in fiscal 2025, driven by higher average fares and increased onboard spending [6] - From fiscal 2024 to 2027, Carnival's revenue is expected to grow at a compound annual growth rate (CAGR) of 5%, aided by market expansion into Asia and fleet growth [7] Group 3: Margin Improvement - Carnival returned to profitability in fiscal 2024, benefiting from higher fares, lower fuel costs, and improved operational efficiencies [8] - Analysts forecast a CAGR of 22% for Carnival's earnings per share (EPS) and an 8% CAGR for adjusted EBITDA [9] Group 4: Valuation Metrics - Carnival's stock trades at low valuations, with a price of $30 reflecting 13x next year's earnings and 8x adjusted EBITDA, compared to Royal Caribbean's higher multiples [10] Group 5: Debt Management - Carnival's total debt increased significantly during the pandemic but has been reduced to $27.3 billion by the second quarter of fiscal 2025 [11][12] - The company's net debt-to-EBITDA ratio improved from 4.1x to 3.7x, indicating gradual financial stabilization [13] Group 6: Investment Perspective - In a market characterized by high valuations, Carnival is viewed as a value play, offering steady growth and low valuations, making it an attractive investment opportunity [14]