Shares of Royal Caribbean Cruises Ltd. ( RCL - Analyst Report ) reached a 52-week high of $36.25 on Tuesday, Jan 15, 2013, just before it is due to report fourth quarter 2012 earnings release later this month, beating its previous 52-week high of $36.18. The closing price of the second largest cruise company on Jan 15, 2013, was $36.20, representing a solid one-year return of about 36.2% and year-to-date return of about 2.3%. The average volume of shares traded over the last three months stands at approximately 1,972K.

Growth Drivers

A strong business model, a slight competitive advantage over its closest peer Carnival Corp. ( CCL - Analyst Report ) , following the latter’s Costa Concordia ship grounding disaster, improvement in booking scenario and exposure to the under-penetrated Asian markets, are the major growth drivers for the shares of Royal Caribbean.

Being the second largest company in the industry, Royal Caribbean enjoys a competitive advantage over many of its industry peers. In fact, after the grounding of the industry’s leading operator Carnival’s ship Costa Concordia in mid-January 2012, Royal Caribbean got a better exposure both on bourse and business, though that tragic incident had a negative impact on the entire sector. After a year of the disaster, the sector has started to revive from shattered passenger confidence and recouped from extreme upheaval.

Although Europe still remains a tough market, overall bookings for the fourth quarter of 2012 and for 2013 across all itineraries remained strong, with year-over-year higher load factors and pricing. Caribbean yields are anticipated to have finished year 2012 on higher note than the 2008-level.

Of late, the Asian market has become the area of focus for the company. The company plans to cater to some under-served ports in China, which have far lower penetration rate compared to cruise markets in the United States and Europe.

Concurrent to its third quarter earnings release, Royal Caribbean increased its full-year guidance that that resulted in an upward movement in estimates for the fourth quarter.

Valuation is Attractive

Royal Caribbean currently trades at a forward P/E of 17.40x, 11.9% discount to the peer group average of 19.75x. Again, its price-to-sales ratio of 1.03x is trading at a 12.0% discount to the peer group average 1.17x. The company’s price-to-book ratio of 0.91x is also lower than peer group average of 1.13x.

Hence, we believe compelling fundamentals helped the stock reach its 52-week high score. Having said this, we are expecting the company to report decent quarterly results later this month.