Carnival Corporation (CCL) looks undervalued to value investors ahead of its Q3 earnings release next Tuesday (29th), before the market opens. For example, its forward P/E ratio is just 10x, versus an average of 13x over the last 2 years. Moreover, the cruise company is generating strong free cash flow (FCF) and high FCF margins.
This allows it to reduce its debt pile, buy back shares, and pay dividends - everything value investors love. SpaceX Has Huge, Unusual Put Options Volume - Is SPCX Set to Fall or Rise From Here? Marvell Technology Stock Price Targets Are Rising - What's the Best MRVL Play?
Stop Missing Market Moves: Get the FREE Barchart Brief – your midday dose of stock movers, trending sectors, and actionable trade ideas, delivered right to your inbox. Moreover, CCL stock is near a low point. CCL closed at $22.31 on Monday, Sept. 21, near a recent 6-month low of $21.84 last Friday, Sept. 18.
This article will show that one attractive way to play CCL is to sell short out-of-the-money put options. For Q2 ending May 31, Carnival Corp saw its revenue rise 5.76%, and for the six months, it rose at the same rate. Moreover, its earnings per share (EPS) hit 41 cents, and management is guiding for full-year 2026 (to Nov. 30) EPS to reach $2.22.
In addition, Carnival generated $1.755 billion in free cash flow (FCF) last quarter, according to Stock Analysis data. And over the trailing 12 months (TTM), its FCF was $3.2 billion, representing 11.72% of TTM revenue. As a result, analysts' 2027 revenue forecasts of $28.59 billion (year ending Nov. 2027) could lead to $3.35 billion in FCF.
That could push the stock significantly higher. For example, using a 10% FCF yield (i.e., 10x FCF), CCL would eventually be worth $33.5 billion (10 x $3.35b FCF). That is +9.6% over its market cap of $30.557 billion (Yahoo!
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