During the pandemic, there were some companies in the FTSE 250 that were hit very hard. Sectors such as travel and tourism suffered from global lockdowns. Yet for the firms that survived, a revival is happening. One growth stock has almost doubled over the past year. This makes me wonder if there’s still time to get involved.
Dealing with the pandemic
The company I’m referring to is Carnival (LSE:CCL). The international cruise line operator has a fleet of 26 ships. I don’t need to go into much detail about the pandemic struggles, beyond the fact that the firm lost over $10bn during its 2020 financial year alone!
Losses have been smaller in the two reporting years since then, but naturally the business isn’t in the same shape it was in during 2019. Evidence of this can be seen from the longer-term share price performance. Over the past five years, the stock is down 71%.
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In order to cope with financial difficulties, debt and other liabilities have been increased. Back in 2019, total liabilities stood at $19.7bn. As of the last full-year report, it had ballooned to $44.6bn.
Arguably, the firm had to take drastic measures in order for Carnival as an entity to survive. And it definitely still carries the battle scars, with the liabilities being a big risk going forward.
Things are changing
Better quarterly results have helped to push the share price higher. For example, Q3 revenue reached an all-time high, with $1bn in net income. Naturally, generating a profit will be a welcome sign for many investors.
Not only this, but the CEO commented that “both revenue and earnings significantly exceeded expectations this quarter enabling us to take up expectations for the year.”
So if the outlook for next year is strong (with a healthy forward order book), with no sign of any lockdowns, Carnival could really start getting back to full health.
Another thing that really impressed me is the focus on bringing debt down. It has also now got $5.7bn of liquidity, which should help cash flow going forward.
Still time to book a ticket
Even with the strong jump recently, I believe there’s still plenty of room for growth next year. One reason for this is that a cloud still hangs over the stock. I think some investors remain sceptical about investing in Carnival after what has happened in recent years. Should this cloud evaporate if earnings keep beating expectations, then sentiment could turn positive very quickly.
Further, if Carnival matches its Q3 profitability over a full year, it would beat the 2019 profit figure. Of course, the business isn’t in the same place as it was back then, but I’d still expect the share price to be closer to the pre-pandemic level on the back of those kind of results.
I’m considering adding this stock to my portfolio when I have some money to spare.
