2-Star Stocks Poised to Plunge: Carnival?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, cruise operator Carnival (NYS: CCL) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Carnival's business and see what CAPS investors are saying about the stock right now.

Carnivalfacts

Headquarters (founded)Miami (1974)
Market Cap$25.7 billion
IndustryHotels, resorts, and cruise lines
Trailing-12-Month Revenue$16.0 billion
ManagementChairman/CEO Micky Arison (since 2003)
CFO David Bernstein (since 1998)
Return on Equity (average, past 3 years)8%
Cash/Debt$471.0 million / $9.5 billion
Dividend Yield3%
CompetitorsGenting Hong Kong
Royal Caribbean Cruises
TUI AG

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 25% of the 500 members who have rated Carnival believe the stock will underperform the S&P 500 going forward.

A couple of months ago, one of those bears, All-Star TerryHogan, touched on the stock's seemingly unsustainable valuation:

They have hedged fuel somewhat, but still have exposure to rising fuel costs. They currently trade at 18x the high end of their own guidance for 2012. I think that multiple is a bit high for their growth rate. If earnings came in below the low end of their range, that means their trading at over 20 x forward earnings. Probably won't nosedive because of the yield, but definitely not an outperformer. Over 5 years though it's probably a good business with boomer demographics.

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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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