Is Now the Time to Buy Carnival?

LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100�and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.

Today I am looking at�Carnival� (LSE: CCL  ) (NYSE: CUK  ) to determine whether you should consider buying the shares at 2,550 pence.

I am assessing each company on several metrics:

Price/Earnings (P/E):�Does the share look good value when compared against its competitors?

Price/Earnings Growth:�Does the share look good value factoring in predicted growth?

Yield:�Does the share provide a solid income for investors?

Dividend Cover:�Is the dividend sustainable?

So let's look at the numbers.

Price	3-Year EPS Growth	Projected P/E	PEG	Yield	3-Year Dividend Growth	Dividend cover
2,550 pence	7%	22	N/A	2.6%	N/A	2.4

The consensus analyst estimate for next year's earnings per share is $1.87 (down 30%)�and dividend per share is $1.00 (no change).

Trading on a projected P/E of 22, Carnival appears significantly more expensive than its peers in the travel and leisure sector, which are currently trading on an average P/E of around 16. Furthermore, Carnival's high P/E and negative near-term earnings growth rate give a negative PEG ratio, which cannot help with my analysis.

Offering a 2.6% yield, the dividend is about the same as the travel and leisure sector average. Unfortunately, Carnival scrapped its dividend during 2009 to preserve cash and, as a result, it is not possible to calculate a three-year dividend growth rate.

Anyway, the present dividend is around 2.5 times covered, giving Carnival plenty room for further payout growth.

Carnival looks expensive with no growth
I believe Carnival looks expensive compared to the near-term growth it is expected to produce. However, I believe Carnival's strength lies in its strong cash flow.

Carnival had revenue of $4.7 billion during the year to September, which gave the group a $1.3 billion profit. Furthermore, from these figures I calculate the group produced a 30% profit margin, which leaves plenty of cash to return to shareholders. Indeed, this year Carnival issued a special dividend of $0.50 per share to shareholders, which increased the total dividend for the year by 50%.

That said, I can see the company is still suffering from the credit crunch, as profits are still below the highs of 2008. In addition, Carnival is also suffering from the current economic environment, which has squeezed consumer incomes and hurt the company's global operations. In particular, a reduction in bookings resulted in revenue falling 4% during the first half of the year.

However, despite major incidents involving the�Costa Concordia�and�Costa Allegra�cruise ships this year, Carnival has not seen a significant decline in bookings for the divisions affected.

Finally, I can see the group is currently focusing on growth in Asia. Carnival has deployed a second cruise ship in China this year and has also opened a new "Princess Cruises" program for the Japanese market.

Anyway, I still believe Carnival looks relatively expensive. Even though Carnival has scope for positive shareholder returns, near-term growth is stagnating. So overall, I believe now does not look to be a good time to buy Carnival at 2,550 pence.

More FTSE opportunities
Although I feel now may not be the time to buy Carnival, I am more positive on the FTSE shares highlighted in "8 Dividend Plays Held By Britain's Super Investor." This exclusive report reveals the favorite income stocks owned by�Neil Woodford�-- the City legend whose portfolios have thrashed the FTSE All-Share by 200% during the 15 years to October 2012.

The report, which explains the full investing logic behind Woodford's dividend strategy and his preferred blue chips, is free to all private investors.�Just click here for your copy. But do hurry, as the report is available for a limited time only.

In the meantime, please stay tuned for my next verdict on a FTSE 100 share.

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