After 40% Rise, What's Next For Carnival Stock?

Forbes

19 hours ago

LISBON, PORTUGAL - JUNE 03: Carnival Miracle, a 88,500 GT Spirit-class cruise ship operated by ... More Carnival Cruise Line, sails the Tagus River after departure from the cruise terminal on June 03, 2025, in Lisbon, Portugal. (Photo by Horacio Villalobos#Corbis/Corbis via Getty Images)
Carnival (NYSE:CCL) shares have increased by approximately 11% in the past month and nearly 40% over the previous 12 months. These recent improvements come after the cruise line reported a set of second-quarter results that exceeded expectations (for the November fiscal year). Revenue was approximately $6.33 billion, reflecting a rise of about 9% compared to the previous year, while net income increased to $565 million, a significant rise from just $92 million a year ago. Carnival has also raised its full-year forecast, indicating that adjusted net income would be 40% greater compared to 2024. The demand for leisure cruising has remained strong following Covid-19 due to appealing prices when compared to land vacations, along with a preference for an all-inclusive, packaged travel experience.
Cruise lines such as Carnival have been benefitting from increased capacity, growing onboard revenues, and some price hikes in recent quarters. Furthermore, Carnival has been concentrating on enhancing its fleet, which has led to robust operating performance and profitability. On July 19, 2025, Carnival will open its Celebration Key destination in the Bahamas. This new site could enhance revenue and brand perception by providing a unique and fully controlled private island experience for guests. So, should you buy Carnival stock after its recent results?
Carnival's recent performance and future outlook appear strong, and the company's valuation is also reasonable. However, the stock isn't an unequivocal buy for several reasons. We reach our conclusion by comparing the current valuation of CCL stock with its operational performance over recent years, as well as its current financial health. Our analysis of Carnival against key metrics such as Growth, Profitability, Financial Stability, and Downturn Resilience indicates that the company exhibits weak operational performance and financial health, as outlined below. Nevertheless, for investors looking for lower volatility than individual stocks, the Trefis High Quality portfolio offers an alternative – having outperformed the S&P 500 and provided returns greater than 91% since its inception.
How Does Carnival's Valuation Compare to The S&P 500?
In terms of what you're paying per dollar of sales or profit, CCL stock appears slightly undervalued compared to the wider market.
• Carnival has a price-to-sales (P/S) ratio of 1.3 compared to 3.1 for the S&P 500
• Moreover, the company's price-to-free cash flow (P/FCF) ratio stands at 17.0 versus 20.9 for the S&P 500
• Additionally, it has a price-to-earnings (P/E) ratio of 16.4, while the benchmark's P/E is 26.9
How Have Carnival's Revenues Increased Over Recent Years?
Carnival's Revenues have experienced significant growth over the past few years.
• Carnival's top line has increased at an average rate of 130.2% over the last 3 years (against an increase of 5.5% for the S&P 500)
• Its revenues have grown 12.7% from $23 billion to $25 billion in the last 12 months (as opposed to 5.5% growth for the S&P 500)
• In addition, its quarterly revenues increased by 7.5% to $5.8 billion in the latest quarter from $5.4 billion the previous year (compared to a 4.8% improvement for the S&P 500)
How Profitable Is Carnival?
Carnival's profit margins are approximately at the median level for companies within the Trefis coverage universe.
• Carnival's Operating Income over the past four quarters was $3.8 billion, indicating a moderate Operating Margin of 15.1%
• Carnival's Operating Cash Flow (OCF) during this timeframe was $5.1 billion, suggesting a moderate OCF Margin of 20.0% (in comparison to 14.9% for the S&P 500)
• For the previous four-quarter period, Carnival's Net Income was $2.1 billion – reflecting a poor Net Income Margin of 8.1% (compared to 11.6% for the S&P 500)
Is Carnival Financially Stable?
Carnival's balance sheet appears very weak.
• Carnival's debt was $28 billion at the conclusion of the most recent quarter, while its market capitalization is $34 billion (as of 6/26/2025). This results in a very poor Debt-to-Equity Ratio of 84.4% (in comparison to 19.4% for the S&P 500). [Note: A lower Debt-to-Equity Ratio is preferable]
• Cash (inclusive of cash equivalents) constitutes $833 million of the $49 billion in Total Assets for Carnival. This culminates in a poor Cash-to-Assets Ratio of 1.7%
How Resilient Is CCL Stock in a Downturn?
CCL stock has performed significantly worse than the benchmark S&P 500 index during some recent downturns. While investors are hopeful for a gentle landing by the U.S. economy, what could happen if there were to be another recession? Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks performed during and following the last six market crashes.
• CCL stock fell 79.6% from a peak of $31.31 on 2 June 2021 to $6.38 on 10 October 2022, compared to a peak-to-trough drop of 25.4% for the S&P 500
• The stock has yet to recover to its pre-Crisis peak
• The highest value the stock has attained since then is $28.49 on 30 January 2025 and it currently trades at around $26
• CCL stock dropped 84.6% from a peak of $51.90 on 17 January 2020 to $7.97 on 2 April 2020, compared to a peak-to-trough decline of 33.9% for the S&P 500
• The stock has not yet recovered to its pre-Crisis level
• CCL stock decreased 70.7% from a high of $51.33 on 9 October 2007 to $15.02 on 20 November 2008, compared to a peak-to-trough drop of 56.8% for the S&P 500
• The stock fully bounced back to its pre-Crisis high by 13 July 2015
modest valuation, concerns remain for Carnival stock, particularly regarding its weak financial standing and resilience during downturns. Investing in a single stock poses risks. Conversely, the Trefis High Quality (HQ) Portfolio, comprising 30 stocks, has a history of consistently outperforming the S&P 500 over the past four years. Why is this? As a collective, HQ Portfolio stocks have delivered superior returns with reduced risk compared to the benchmark index; it has shown less volatility, as depicted in HQ Portfolio performance metrics.