Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Norwegian Cruise Line Holdings Ltd. (NCLH Quick QuoteNCLH - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Norwegian Cruise has a trailing twelve months PE ratio of 13.46. This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.61. If we focus on the long-term PE trend, Norwegian Cruise’s current PE level puts it below its midpoint of 20.8 over the past three years. Moreover, the current level stands below the highs for this stock, suggesting it might be a good entry point.



Further, the stock’s PE also compares favorably with the Zacks classified Consumer Discretionary sector’s trailing twelve months PE ratio, which stands at 24.50. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.



We should also point out that Norwegian Cruise has a forward PE ratio (price relative to this year’s earnings) of just 13.34, so it is fair to say that a slightly more value-oriented path may be ahead for Norwegian Cruise stock in the near term too.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Norwegian Cruise has a P/S ratio of about 2.02. This stands lower than the S&P 500 average, which comes in at 2.93 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past three years.



If anything, NCLH is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to recent trends.

Broad Value Outlook

In aggregate, Norwegian Cruise currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Norwegian Cruise a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Norwegian Cruise is just 0.78, a level that is far lower than the industry average of 2.05. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 7.05, which is better than the industry average of 7.31. Clearly, NCLH is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Norwegian Cruise might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘C’. This gives NCLH a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen three estimates go higher in the past sixty days compared to two lower, while the full year estimate has seen one upward revisions and three downward in the same time period.

As a result, the current quarter consensus estimate has fallen by 1.8% in the past two months, while the full year estimate has dropped 1.2%.

You can see the consensus estimate trend and recent price action for the stock in the chart below:

Notably, the stock has a long term expected earnings growth of 18.1% and sports a Zacks Rank #3 (Hold). These mixed expectations indicate that while the stock’s growth story might be good over the long term, analysts have some apprehensions about the stock in the immediate future. Thus, we are looking for in-line performance from the company in the near term.

Bottom Line

Norwegian Cruise is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 49% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the ZacksLeisure & Recreation Services industry has underperformed the broader market, as you can see below:



So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

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