Lots Carnival cruise lines ((NYSE: CCL) Investors are waiting for the day the company goes back to sea. The Consumer Discretionary COVID-19 cut off its primary source of income. While few have written the company off as a complete shipwreck, investors need to determine if its lower price tag makes it compelling enough for a long-term investment.

The state of the carnival

Almost a year after the pandemic broke out, the Carnival and its ships remain in port. At the time of this writing, cruises won’t resume until May 1st. Carnival has also repeatedly postponed this date, so such announcements are unlikely to do much for investor optimism.

What also hurts investor optimism is the impact of the pandemic on corporate finances. Revenue for 2020 was 73% year-over-year. just under $ 5.6 billion, of which $ 4.8 billion in the first quarter. This resulted in a loss of more than $ 10.2 billion in 2020, a long way from 2019 when the company reported net income of just under $ 3 billion.

Image source: Getty Images

In comparison, the total costs only decreased by around 18%. The company had to incur port costs, maintenance, insurance and dry dock costs that do not vary with the number of passengers. Carnival also had to maintain nearly 80% of its labor costs.

To cover those costs, Carnival turned to the debt and stock markets to survive. Long-term debt rose to over $ 22.1 billion in 2020, up from $ 9.7 billion the previous year Junk credit rating. Carnival also issued 83 million additional shares.

As a result, the company held $ 9.5 billion in cash as of the end of fiscal 2020. According to the company, that cash should support Carnival for 2021 even if sales stay close to zero for the year.

In addition, Carnival stays better off than its closest colleagues. Norwegian Cruise Line Holdings In the first nine months of 2020, the company lost nearly $ 3.3 billion. As of September 30, it holds nearly $ 2.7 billion in cash.

With Carnival’s fiscal year ending a month before Norwegian’s, investors have more up-to-date data for Carnival. Even so, Carnival’s book value is almost five times that of Norwegian. The fact that Norwegian has lost about a third of the money as Carnival has so far, with the exception of the fourth quarter, is a bad sign for the company.

in addition, royal CaribbeanThe company, which owns around 40% of Carnival’s book value, has amassed slightly more cash than Norwegians as of September 30, around $ 3 billion. Still, it suffered losses of more than $ 4.4 billion in the first nine months of 2020, with less flexibility to stay in port.

Carnival stocks are cheap for a reason

Carnival also reported that advance bookings for 2022 increased ahead of 2019. If these bookings generate income, investors may see the current price as a bargain.

However, given Carnival’s stronger position, the stock remains in question. Amid these battles, Carnival is trading less than 50% of its 52-week high, a level that doesn’t necessarily make this stock “cheap”.

CCL Data from YCharts

Quarterly sales fell by more than 99%. Given this level of financial devastation, a 50% discount may not adequately compensate investors for the additional risk. Given uncertain start dates and pandemic concerns among travelers, investors shouldn’t necessarily expect a return to 2019 sales levels in the short term.

Will the carnival ever recover?

Despite an idle fleet and negligible revenue, Carnival has a healthier balance sheet and larger cash supply than its main competitors in this troubled industry. Many potential customers have also shown the first signs that they want to drive again. This is a good sign for the company when the industry recovers, especially if it sails again before 2022.

Survival is unsuccessful, however, and a 50% discount might not be a bargain if revenues drop close to 100%. Additionally, Carnival faces challenges such as converting advance bookings into revenue and dealing with the massive debt that arose during the contagion. Although the Carnival population isn’t dead in the water, it will likely sail in rough seas for a long time to come.