The population in the developed world is getting older, and the baby boomers are now hitting retirement and doing so with fatter wallets and a larger desire for holidays than ever before.

Carnival Corporation

The baby boomer generation makes up roughly 26 percent of the U.S. population and controls the largest portion of the country’s wealth. It is estimated that over the next 17 years, 10,000 boomers will retire each year,  and that 52 percent of the earliest generation of ‘boomers’ is already fully retired. In comparison, back in 2007, only 19 percent of the earliest boomers had retired.  An increasing number of wealthy retirees and rising incomes within emerging markets mean that more people now have more time and more money to go on longer more luxurious holidays.

Carnival Corporation looking attractive

This is where Carnival Corporation (NYSE:CCL) starts to look attractive. Unlike many holiday markets, the cruise industry and market is controlled by a relatively small number of companies. So, unlike the hotel industry, which is highly fragmented and hard to find a suitable company that will benefit from the boom, rising demand for cruises is almost certainly going to boost Carnival’s revenue.

Unfortunately, Carnival Corporation (NYSE:CCL) has been hit by a series of unfortunate events over the past two years, knocking consumer and investors’ confidence in the company. However, I believe this presents an opportunity, as Carnival is now trading at a price-to-book value of 1.2, on a 12-month-trailing basis, below its 10-year average of 1.7.

Carnival still short on profitability

Having said that, the company has not been able to return to the same level of profitability and efficiency that it had in the run-up to 2008, when earnings-per-share reached a high of $2.9. Nonetheless, with the global economic recovery on track and the company’s fleet now 20 percent larger (by asset value) than it was during 2008, Carnival Corporation (NYSE:CCL) should soon be able to return to levels of profit seen before the recession. Moreover, if Carnival is able to return to its pre-2008 return-on-asset level of 7 percent (is entirely possible based on the enlarged customer base and rising global incomes) Carnival’s earnings-per-share could surge as high as $3.6 -a forward P/E of 10, although it is impossible to say when this figure will be reached.

Of course, this is a longer-term view, but entirely possible. Indeed, Carnival Corporation (NYSE:CCL)’s revenue per share figure was $19.75 at the end of 2012 and barring the $20 per share figure reported at the end of 2011, this was highest revenue figure ever reported by the company.

High profile disasters

However, over the same period the company’s costs have been rising and margins contracting as Carnival and its travel agents heavily discount tickets in an attempt to win over customers after the company’s series of high profile disasters, which filled the news pages over the past two years.

Still, it is likely that all this discounting will not last much longer, and as long as Carnival Corporation (NYSE:CCL) can steer its ships away from disaster, margins should start to grow again.

So overall, Carnival should be in line for a re-rating soon. Rising incomes and a growing global economy should boost revenues and allow the company’s margins to begin expanding again. In addition, the company is trading below its 10-year average price-to-book ratio.