They say you get what you pay for, and it’s absolutely evident when it comes to cruise line stocks. Stack up Norwegian Cruise Line(NYSE: NCLH) Against bigger rivals Royal Caribbean(NYSE: RCL ) And Carnival(NYSE: CCL ) – and even a river cruise leaderViking Holdings(NYSE: VIK ) — and one of them stands for its low relative valuation — for good measure.
Any metric, select any metric. Norwegian is, in theory, the cheapest. But that doesn’t make it the best stock. You could have said that even a year ago. How did it turn out?
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NCL also stands out from the pack for some particularly bad reasons. A nod to the reason I want to start with is a chart. NCL has not only been lagging its peers’ share performance over the past year. This is the only cruise line stock trading lower during that time.
Three other cruise line stocks have gained double-digit percentages, sliding more than 20%. It’s not a good look. This is proof that a rising tide does not lift all ships.
NCL textbook is cheap. Let’s start with the forward income. This is the P/E ratio for all four stocks based on what analysts think each company will earn in fiscal year 2026. If this was a limbo contest, NCL would have won.
NCL: Trades for less than nine times forward earnings.
Carnival: 12 times forward earnings.
Royal Caribbean: 18 times forward earnings.
Viking: 22 times forward earnings.
Image source: Getty Images.
Go to the other end of the income statement. NCL also stands out for its lowest trailing revenue multiple compared to its market cap. Let’s go over the revenue multiples of the four companies.
Market cap divided by revenue for each stock:
NCL: 1.1.
Carnival: 1.7.
Royal Caribbean: 4.9.
Viking: 5.3.
If you’re a value investor, it’s understandable if you want to keep NCL under the microscope. A stock in a growing industry Forward P/E Going to turn heads in the single digits. Don’t let it make you dizzy.
Some of the most disappointing stocks are those that seem too cheap to be true. On the surface, NCL appears to be one The Value Trap. It trades at multiples below its peers. I haven’t looked into it yet, but NCL is also at the back of the pack when it comes to margins. After all, when it trades at half Royal Caribbean’s earnings but less than a quarter of its revenue, it clearly lacks the ability to convert more sales into the bottom line than its closest competitor.
Where does NCL stand? Viking is growing much faster than the other three stocks, justifying its market premium. Carnival and Royal Caribbean pay dividends, reducing income investors. But if it just comes down to the lowest-cost metric, it’s more of a surrender than a victory lap. White flags can also be red flags.
The rub is that I’m not willing to give up on NCL’s chances of running alongside its more successful — and, in the past few years, more profitable — cruise rivals. Happy industry dynamics must eventually lift even the weakest ship.
Viking has a chance to follow in the footsteps of Carnival and Royal Caribbean this revenue season. The companies reported fourth-quarter earnings growth that more than doubled their year-over-year performance in the third quarter three months ago. NCL is also in a similar situation. After NCL posted 5% top-line growth in a seasonally strong third quarter, Wall Street pros are targeting 11% growth in the fourth quarter, which will be announced later this month.
Can NCL prove itself? Can a strong report lead to sustainable growth? Can Industry Lagarde turn around like her peers, turning headwinds into tailwinds? The market is waiting for NCL to stop acting so cheaply. If it does, you won’t mind paying for something nice.
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Rick Menhrez Holds positions with Royal Caribbean Cruises and Viking. The Motley Fool recommends Carnival Corporation and Viking. The Motley Fool has one Disclosure Policy.
