Carnival plc (CCL): Buy, Sell, or Hold?

5. Valuation: Shares are trading at a trailing price-to-earnings (P/E) ratio of 19, above its 10-year historical P/E of 17. Consensus earnings per share estimates are 134 pence for the year, giving it a forward P/E of 17. It also currently trades at a price-to-book ratio (P/B) of 1.1, below its 10-year historical P/B average of 2 and sports a current dividend yield of 3.8%, twice covered.

My verdict on Carnival
Despite Carnival’s mediocre results for the last few years, it remains the leading company in a largely underpenetrated industry. Along with Royal Caribbean, they control 75% of the world’s cruise capacity. The company’s plans of a more “measured pace of newbuilds” in the coming years bodes well for shareholders by way of increased dividends and share buybacks. However, the continuing weakness of the global economy — along with its relatively high debt — is a cause for concern, while recent incidents with Costa Concordia and Triumph may still be fresh on people’s minds, which could affect demand in the near term. The shares’ valuations seem quite expensive considering all the risks mentioned.

So, overall, I believe Carnival at 2,303 pence looks like a hold.

The article Carnival: Buy, Sell, or Hold? originally appeared on Fool.com and is written by Zarr Pacificador.

Zarr Pacificador owns no shares mentioned in this article, and neither does The Motley Fool.

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