Investing in stocks inevitably means buying into some companies that perform poorly. But long term Royal Caribbean Cruises Ltd. (NYSE:RCL) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 54% drop in the share price over that period. And the ride hasn’t got any smoother in recent times over the last year, with the price 26% lower in that time. Furthermore, it’s down 31% in about a quarter. That’s not much fun for holders. Of course, this share price action may well have been influenced by the 16% decline in the broader market, throughout the period.
With the stock having lost 21% in the past week, it’s worth taking a look at business performance and seeing if there’s any red flags.
See our latest analysis for Royal Caribbean Cruises
Because Royal Caribbean Cruises made a loss in the last twelve months, we think the market is probably more focused on revenue and revenue growth, at least for now. When a company doesn’t make profits, we’d generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years, Royal Caribbean Cruises’ revenue dropped 74% per year. That means its revenue trend is very weak compared to other loss making companies. With no profits and falling revenue it is no surprise that investors have been dumping the stock, pushing the price down by 15% per year over that time. When revenue is dropping, and losses are still costing, and the share price sinking almost, it’s fair to ask if something is remiss. It could be a while before the company repays long suffering shareholders with share price gains.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
NYSE:RCL Earnings and Revenue Growth May 13th 2022
Royal Caribbean Cruises is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
We regret to report that Royal Caribbean Cruises shareholders are down 26% for the year. Unfortunately, that’s worse than the broader market decline of 9.4%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. We realize that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example – Royal Caribbean Cruises has 3 warning signs (and 1 which doesn’t sit too well with us) we think you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.
