The rise of the travel business swept the world and turned into a cash flow. The business began to recover after the market cooled during COVID-19. Cruise vacations also experienced an upswing, as demand for this way of traveling led to a record number of bookings. Tour reservations during travel in 2023 were almost twice as high as in 2019, which shows the strengthening of the travel industry. Interest in the securities of tourism companies has already begun to put pressure on their prices, so it remains to grab undervalued cruise stocks to enjoy their rise.
The affordability of cruises is boosting them over land-based alternatives, leading to a forecast of 35.7 million passengers in 2024. Exciting niches are always crowded with competitors, so companies in the industry compete in technology, creativity, and service. Travel providers are doing everything they can to meet expectations: launching customized itineraries for young people, not focusing on group travel only, and expanding their product range to unprecedented levels. All this is to lure those who want to spend time on cruises and get the most out of their dream vacation.
Agilysys (AGYS)
Agilysys’s (NASDAQ:AGYS) main market is still the Asia-Pacific region, where it has proven to be a reliable partner for the hospitality industry. However, the company is considering expanding into Europe to diversify and unlock the potential of its products and marketing capabilities. The strong financial performance reinforces this ambition, as Agilysys’ operational efficiency can put most competitors under the radar. Revenue for the last fiscal year reached $237.5 million, up 20% from a year ago. Net profit is not far behind and shows an increase of $85 million. Higher revenues led to a jump in profit margin, which reached 36%. Analysts’ forecast for the next two years indicates a growth prospect of 18%, which is significantly higher than the market average and in line with the company’s rapid pace.
Profitability records did not end in 2023, as Agilysys managed to reach $62.2 million in the first quarter. The 17.6% year-on-year increase marks the ninth consecutive quarter of growth. The upward trajectory refutes statements about a possible break in growth, which places AGYS among undervalued cruise stocks.
Agilysys successfully reengineered its core products into cloud-based software solutions and increased sales of software and subscription services. Thus, the company increased its competitiveness and compensated for the decline in sales of POS terminal equipment.
Sabre (SABR)
The travel industry has moved from in-room phones to high-speed Internet, from notebooks to databases, from brochures to websites. Sabre (NASDAQ:SABR) meets the expectations of today’s customers by providing technology and software for marketing, distribution and services that benefit the leisure travel business. Airlines, hotel operators, and cruise lines use these solutions, and the company is present not only in the U.S. but also in Asia and Europe.
Sabre’s capitalization shows its readiness to fight for a place in the sun, as it has reached $1.1 billion. With such a resource, the company could afford a slight loss in the past, but analysts believe that the company’s history of profitability begins in 2024. If the average annual growth rate is maintained at 76%, this becomes a feasible plan. At the stage of intensive investment, the company in the last quarter of 2023 managed to generate revenue 8.9% higher than the same indicator of the previous year. Thus, in three months, Sabre received $687.1 million and has no plans to stop. SABR is rightfully ranked among undervalued cruise stocks, as it could maintain its performance even when share prices in the sector fell by an average of 5.9%.
The report for Q1 2024 reports revenue of $782.9 million and a reduction in loss per share from 32 cents to 19 cents. The high growth rate increases the company’s ambitions and is reflected in the projected profit for 2025 of $56 million.
Norwegian Cruise Line Holdings (NCLH)
The market is changing its attitude towards Norwegian Cruise Line Holdings (NYSE:NCLH). Mizuho Securities has already revised its target price from $21 to $24 and upgraded the stock rating to “buy.” The industry’s development and the company’s timely cost control initiatives contribute to the positive sentiment around this security.
Norwegian Cruise Line is not sitting idly by waiting for results to improve. It is trying to increase its value for shareholders, and the increase in profitability and operating leverage indicate the success of the taken course. To this end, the company is actively reorganizing its routes and updating its approach to doing business in the high-tech era.
More than half of NCLH owners are financial institutions and funds, which indicates that it meets the criteria of large investors. Insider ownership of shares is less significant compared to the share of Capital Research and Management Company, but continues to expand. The recent acquisition by a director (Cil Jose E) shows management’s confidence in the company’s long-term prospects.
As of the first quarter, the company showed an annual revenue growth of 45.17%. In the context of a market capitalization of $6.86 billion, this demonstrates a rapid recovery and potential for future gains. The price-to-earnings (P/E) ratio of 20.3 indicates that NCLH belongs to undervalued cruise stocks and is an attractive investment opportunity.
On the date of publication, Julia Magas did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
