Investors interested in stocks from the Leisure and Recreation Services sector have probably already heard of Royal Caribbean (RCL - Free Report) and Cedar Fair, L.P. (FUN - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Royal Caribbean has a Zacks Rank of #2 (Buy), while Cedar Fair, L.P. has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that RCL is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
RCL currently has a forward P/E ratio of 11.88, while FUN has a forward P/E of 15.91. We also note that RCL has a PEG ratio of 0.85. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. FUN currently has a PEG ratio of 2.65.
Another notable valuation metric for RCL is its P/B ratio of 2.23. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, FUN has a P/B of 91.48.
These metrics, and several others, help RCL earn a Value grade of B, while FUN has been given a Value grade of D.
RCL has seen stronger estimate revision activity and sports more attractive valuation metrics than FUN, so it seems like value investors will conclude that RCL is the superior option right now.