Norwegian Cruise Line stock’s (NYSE: NCLH) 33% decline year-to-date is a significant deviation from the S&P 500 index’s 0.6% drop. This situation highlights a general downturn within the cruise sector, as Carnival Corp has seen a reduction of 12%, Viking Holdings experienced a decline of 2%, and Royal Caribbean stock yielded a modest increase of 3%.
Recently, Norwegian announced mixed Q1 results. Adjusted EPS was $0.07, falling short of the consensus estimate of $0.09, while revenue totaled $2.13 billion, slightly lower than the $2.15 billion forecast. The GAAP net loss amounted to $40.3 million. An occupancy rate of 101.5% met guidance yet showed a decline year-over-year, attributed to heightened dry-dock activities. Despite management acknowledging some “softening” in forward bookings, the balance of advance ticket sales rose 2.6% year-over-year to $3.9 billion, indicating a persistent underlying demand.
However, NCLH stock appears less appealing at its current price of approximately $17. We have several significant concerns regarding NCLH stock, which renders it less attractive despite its very low valuation. See Buy or Sell Norwegian Cruise stock?
We arrive at this conclusion by analyzing the current valuation of NCLH stock against its operational performance in recent years, along with its present and historical financial status. Our evaluation of Norwegian Cruise Line based on essential criteria of Growth, Profitability, Financial Stability, and Downturn Resilience reveals that the company exhibits a very weak operating performance and financial condition, as outlined below. For investors desiring more stable returns with lower volatility, the Trefis High Quality Portfolio could prove to be a promising alternative, having outperformed the S&P 500 with over 91% returns since its inception.
How Does Norwegian Cruise’s Valuation Compare to the S&P 500?
In terms of what you spend per dollar of sales or profit, NCLH stock seems inexpensive relative to the broader market.
• Norwegian Cruise Line has a price-to-sales (P/S) ratio of 0.8, in contrast to a figure of 2.8 for the S&P 500
• Furthermore, the company’s price-to-free cash flow (P/FCF) ratio is 3.9 against 17.6 for the S&P 500
• Additionally, it holds a price-to-earnings (P/E) ratio of 10.5 compared to the benchmark’s 24.5
How Have Norwegian Cruise’s Revenues Developed in Recent Years?
Norwegian Cruise Line’s Revenues have demonstrated significant growth in recent years.
• Its revenues have increased 10.9% from $8.5 billion to $9.5 billion over the past 12 months (in comparison to growth of 5.3% for the S&P 500)
• Moreover, its quarterly revenues dipped 3% to $2.1 billion in the latest quarter compared to $2.2 billion a year earlier (versus a 4.9% improvement for the S&P 500)
What Is Norwegian Cruise Line’s Profitability?
Norwegian Cruise Line’s profit margins are around the median level for companies within the Trefis coverage area.
• Norwegian Cruise Line’s Operating Income over the previous four quarters was $1.5 billion, signifying a moderate Operating Margin of 15.5% (versus 13.1% for the S&P 500)
• Norwegian Cruise Line’s Operating Cash Flow (OCF) during this timeframe was $2.0 billion, indicating a moderate OCF Margin of 21.6% (in comparison to 15.7% for the S&P 500)
• Over the last four-quarter period, Norwegian Cruise Line’s Net Income amounted to $910 million, signifying a moderate Net Income Margin of 9.6% (versus 11.3% for the S&P 500)
Is Norwegian Cruise Financially Stable?
Norwegian Cruise Line’s balance sheet appears to be very weak.
• Norwegian Cruise Line’s debt stood at $13 billion at the conclusion of the most recent quarter, while its market capitalization is $7.6 billion (as of 5/21/2025). This reflects a very poor Debt-to-Equity Ratio of 163.6% (compared to 21.5% for the S&P 500). [Note: A lower Debt-to-Equity Ratio is preferable]
• Cash (including cash equivalents) constitutes $185 million of the $21 billion in Total Assets for Norwegian Cruise Line. This results in a very poor Cash-to-Assets Ratio of 1.0% (against 15.0% for S&P 500)
How Resilient Is NCLH Stock During Economic Downturns?
NCLH stock has performed considerably worse than the benchmark S&P 500 index during some recent downturns. As investors hope for a soft landing in the U.S. economy, what could the implications be if another recession occurs? Our dashboard How Low Can Stocks Go During A Market Crash illustrates how major stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• NCLH stock plunged 69.2% from a peak of $33.71 on 8 June 2021 to $10.38 on 16 June 2022, compared to a peak-to-trough decline of 25.4% for the S&P 500
• The stock has not yet returned to its pre-Crisis peak
• The highest point the stock has achieved since then is $29.07 on 30 January 2025 and currently trades at approximately $17.20
Covid Pandemic (2020)
• NCLH stock diminished 87.0% from a high of $59.65 on 17 January 2020 to $7.77 on 18 March 2020, compared to a peak-to-trough decline of 33.9% for the S&P 500
• The stock has not yet returned to its pre-Crisis peak
Synthesizing the Information: Implications for NCLH Stock
In conclusion, Norwegian Cruise Line’s performance across the outlined parameters is as follows:
• Growth: Very Strong
• Profitability: Neutral
• Financial Stability: Extremely Weak
• Downturn Resilience: Extremely Weak
• Overall: Weak
Thus, despite its very low valuation, we believe the stock is unattractive, which reinforces our assessment that NCLH is a poor investment choice.
While it is advisable to refrain from acquiring NCLH stock at this time, you may consider exploring the Trefis Reinforced Value (RV) Portfolio, which has surpassed its all-cap stocks benchmark (comprising the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) in delivering robust returns for investors. What accounts for this? The quarterly balanced composition of large-, mid- and small-cap RV Portfolio stocks has provided a nimble method to capitalize on favorable market conditions while mitigating losses when the markets decline, as detailed in RV Portfolio performance metrics
Read the full article here
