Last update on 2024-06-06

Royal Caribbean Group (RCL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Royal Caribbean Group's Piotroski F-Score for 2023 stands at 7/9, showcasing strong financial health, with significant improvements in profitability and liquidity post-COVID-19.

Short Analysis - Piotroski Score: 7

We're running Royal Caribbean Group (RCL) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Royal Caribbean Group (RCL) was analyzed using the Piotroski F-Score, which measures a company's financial strength based on nine factors related to profitability, liquidity, and operating efficiency. RCL's Piotroski Score is 7 out of 9, indicating a strong financial position. 1. Profitability: Positive net income ($1.7B) and cash flow from operations ($4.48B). ROA increased from -0.0653 to 0.0493. 2. Liquidity: Increase in leverage (higher debt levels) and declining current ratio, which is below industry average. Number of outstanding shares increased slightly. 3. Operating Efficiency: Gross Margin and Asset Turnover improved significantly, reflecting better profitability and efficiency.

Insights for Value Investors Seeking Stable Income

Royal Caribbean Group's financial health shows significant recovery and strength in several areas, particularly in profitability and operating efficiency. However, the increase in leverage and declining current ratio are concerns. Given the strong Piotroski Score and recent improvements, RCL is worth consideration for further research as a potential investment. Still, potential investors should be cautious about the increased debt levels and ensure these concerns are aligned with their risk tolerance.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Royal Caribbean Group (RCL)

Company has a positive net income?

Net income analysis is fundamentally crucial as it represents the profitability of a company. Positive net income indicates profit, whereas negative net income represents a loss.

The net income of Royal Caribbean Group (RCL) in 2023 stands at $1,697,000,000. This positive net income signifies profitability and adds 1 point in the Piotroski Analysis. Reviewing the historical data, RCL has faced challenges in recent years, particularly evident with the substantial losses in 2020 and 2021, which coincides with the COVID-19 pandemic period. However, a return to profitability in 2023 is a strong indicator of recovery and financial health for the company.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is positive for Royal Caribbean Group (RCL). This metric indicates the amount of cash generated from RCL's core business operations, and it is crucial as it demonstrates the company’s ability to generate sufficient cash flow to maintain and grow its operations without relying on external financing.

Royal Caribbean Group (RCL) reported a Cash Flow from Operations (CFO) of $4,477,000,000 in 2023, which is positive. Over the last 20 years, RCL has experienced fluctuating CFO values with significant downturns observed in 2020 and 2021 during which CFO values dropped drastically to -$3,731,653,000 and -$1,878,000,000 respectively, likely impacted by the global COVID-19 pandemic. However, the recovery to a positive $4,477,000,000 in 2023 marks a significant turnaround, indicating a robust recovery and strong operational efficiency post-pandemic. This is a positive trend for the company and contributes to its overall financial health, thus earning it 1 point in the Piotroski Score for this criterion.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) tracks the company's efficiency in using its assets to generate earnings. An increase in ROA typically signals better management and improved profitability.

Royal Caribbean Group (RCL) has shown a positive change in its Return on Assets (ROA), increasing from -0.0653 in 2022 to 0.0493 in 2023, which signifies an improvement in the company’s usage of its assets to generate earnings. This change marks an important turnaround point; moving into positive territory. Analyzing the past data, RCL faced significant pressure during the COVID-19 pandemic, as evident in 2020 and 2021 with financial setbacks leading to negative ROA. The recent uptick marks a pivotal recovery, especially when compared against the industry median ROA values that have been consistently higher (ranging from 0.439 to 0.8569 over the past 20 years). This rise in ROA earns RCL 1 point in the Piotroski score, indicating a positive trend in profitability and management efficiency.

Operating Cashflow are higher than Netincome?

The criterion compares the operating cash flow (OCF) with net income. This check is vital as a higher OCF over net income signifies high-quality earnings and strong cash generation.

For Royal Caribbean Group (RCL) in 2023, the operating cash flow stood at $4,477,000,000, while the net income was $1,697,000,000. Given that the operating cash flow substantially surpasses net income, this is considered a positive (add 1 point) in the Piotroski Analysis. This considerable difference suggests that RCL generates robust cash flows from its core operations, indicating high earnings quality. Additionally, when examining the data over the past 20 years, we can see that OCF has been generally increasing, highlighting a trend of improving cash generation capability. The notable outliers in 2020 and 2021, where negative OCF and net income figures are observed, were likely impacted by the COVID-19 pandemic, which severely affected the cruise industry. However, the strong rebound in 2023 demonstrates resilience and effective cash management.

Liquidity of Royal Caribbean Group (RCL)

Leverage is declining?

Change in Leverage refers to the change in the company's ratio of debt to the value of its equity over a period of time. Lower leverage indicates a stronger balance sheet and potentially lower default risk.

The Leverage for Royal Caribbean Group (RCL) has increased from 0.5791 in 2022 to 0.6462 in 2023. Given that leverage has increased, we have to set it to 0. A higher leverage ratio indicates that the company is using more debt to finance its assets, which can be concerning. Historically, RCL's leverage was significantly lower in the years prior to 2019, with an average leverage value well under 0.4. This recent uptick in leverage could be associated with increased borrowing. The increased leverage suggests potential risk as it may indicate a higher level of debt, likely resulting from the financial burdens induced by the pandemic or fleet expansion, which calls for careful scrutiny.

Current Ratio is growing?

The Current Ratio is a liquidity measure, indicating a company's ability to pay short-term obligations. A higher ratio often means better liquidity and financial health.

For Royal Caribbean Group (RCL), the Current Ratio decreased from 0.3738 in 2022 to 0.1906 in 2023. Compared to the industry median, which stands at around 1.0868 for 2023, RCL's current ratio is considerably lower. This decline indicates a worsening liquidity position. The long-term trend shows Royal Caribbean's Current Ratio consistently underperforming the industry median, which is a concerning sign. Therefore, RCL does not earn a point for this criterion as the ratio has decreased and remains substantially below the industry norm.

Number of shares not diluted?

Change in Shares Outstanding measures the increase or decrease in the number of shares a company has issued. It's important because a decrease often indicates share buybacks, which can be a positive sign for investors as it suggests the company believes in its own value.

The outstanding shares for Royal Caribbean Group increased from 255,011,000 in 2022 to 256,000,000 in 2023, a rise of 989,000 shares. This signifies that there was no share buyback, and therefore, we award 0 points for this criterion. Looking at the long-term data, shares have fluctuated, reaching a peak in recent years. This trend of increasing shares is generally not favorable for shareholders wanting value concentration and higher EPS.

Operating of Royal Caribbean Group (RCL)

Cross Margin is growing?

The criterion requires comparing the Gross Margin from the current year to the previous year. An increase indicates improved profitability and operational efficiency, which is pivotal for positive financial health.

For Royal Caribbean Group (RCL), the Gross Margin increased from 0.2516 in 2022 to 0.4406 in 2023. This notable improvement of 18.90 percentage points is a positive indicator, suggesting enhanced profitability and effective cost management. Adding 1 point for this criterion, RCL’s Gross Margin in 2023 reflects a robust upward trend, nearing pre-pandemic levels, although it still falls short of the industry median of 0.8214 for 2023. This implies that while RCL is recovering, there is still room for progress to align with industry standards.

Asset Turnover Ratio is growing?

Asset Turnover is a measure of a company's efficiency in generating revenue from its assets. A higher ratio indicates better performance.

For Royal Caribbean Group (RCL), the Asset Turnover increased from 0.2677 in 2022 to 0.4034 in 2023, signaling improved efficiency in the utilization of assets to generate revenue. This is a positive trend as it indicates the company's ability to generate more revenue from its asset base has improved, possibly reflecting operational efficiencies or higher demand for its services post-pandemic. This improvement adds 1 point to the Piotroski score.