Every year Fortune Magazine publishes its list of the ten best stocks for the rest of 2011 and Royal Caribbean has made their list. Fortune Magazine describes the list as stocks that are "expected to bolster their profits an average of 61% next year -- vs. 14% for the S&P -- and yet they trade at an average 12 times next year's earnings, vs. 13 times for the S&P."
Coming in at number 9 is Royal Caribbean and Fortune Magazine seems to like how well the stock has done in the recent past, "After a stormy period, the sailing has lately been -- dare we say it? -- smooth for Royal Caribbean. The cruise company was pounded by the Great Recession, with earnings dipping from $2.68 to 75¢ per share between 2008 and 2009. Now leisure spending is recovering, and Royal Caribbean is benefiting from the fact that cruises have always cost less than comparable land vacations. The company's earnings are on pace to rise 168% in 2010. By comparison, operating earnings at Disney's theme parks and resorts fell 7% during Walt Disney Co.'s fiscal year that ended Oct. 2.".
Royal Caribbean's stock is trading at about $40 a share right now, but Ken Kuhrt, an analyst and fund manager at Ariel Investments, believes Royal Caribbean stock deserves a P/E closer to 17, which was Royal Caribbean's average valuation from 1997 to 2007. That translates to a stock price of $54 -- just the sort of gain that could fund a nice little vacation.
