Carnival Corporation & plc (NYSE:CCL) is priced well, but growth is lacking

Considering that almost half of the companies in the hospitality sector in the United States have a price-to-sales ratio (or “P/S”) of more than 1.3x, Carnival Corporation & plc (NYSE:CCL) seems to be sending out some buy signals with its price-to-earnings ratio of 0.8x. Although it is not wise to just take the P/S at face value as there may be an explanation as to why it is limited.

Check out our latest analysis for Carnival Corporation &

What does Carnival Corporation &’s recent performance look like?

Carnival Corporation & has certainly done a good job lately, as its revenue has grown more than most other companies. One possibility is that the price-to-earnings ratio is low because investors think this strong revenue performance may be less impressive in the future. If the company manages to stay on track, investors should be rewarded with a share price that matches its revenue figures.

Want to know how analysts think the future of Carnival Corporation and the industry compares? In that case our free report is a good starting point.

How is Carnival Corporation &’s revenue growth trend?

Carnival Corporation’s P/S ratio would be typical of a company expected to deliver limited growth and, more importantly, underperform the industry.

If we first look back, we see that the company’s turnover grew by a whopping 51% last year. The last three years have also seen incredible overall revenue growth, helped by incredible near-term performance. Accordingly, shareholders would have been delighted with this medium-term revenue growth.

Looking ahead, estimates from the analysts covering the company suggest that revenue should grow 5.8% per year over the next three years. That appears to be significantly lower than the 11% annual growth forecast for the broader sector.

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

The most important takeaway

In general, we prefer to limit the use of the price-to-sales ratio to determining what the market thinks about the overall health of a company.

We found that Carnival Corporation & is maintaining its low P/S as the weakness in expected growth is lower than that of the broader industry, as expected. At this point, shareholders accept the low price-to-earnings ratio, as they admit that future earnings are unlikely to deliver any pleasant surprises. The company will need a change in fortunes to justify the increase in price-to-earnings ratio going forward.

It is also worth noting that we have found 3 Warning Signs for Carnival Corporation & (1 makes us a little uncomfortable!) that you should consider.

If companies with solid past earnings growth are for youyou might want to see this free collection of other companies with strong earnings growth and low price/earnings ratios.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.