After Another Record-Setting Quarter, Is Carnival Stock a No-Brainer Buy?

The travel industry has been doing well in recent years as consumer demand for vacations has remained relatively resilient despite high inflation. Whether pent-up demand or some other factor boosting the industry, many travel companies are doing just fine.

One stock that might look particularly good is Carnival (NYSE: CCL). The cruise ship operator has been routinely posting record numbers as demand is through the roof. Last month, it posted record results yet again, but the stock remains well below the levels it was at before the pandemic.

Is this a massive buying opportunity for investors, or is there reason to hold off on Carnival despite its strong numbers?

Carnival's profits jumped drastically in the third quarter

On Sept. 30, Carnival reported its third-quarter numbers with revenue reaching an all-time high of $7.9 billion. The quarter ended on Aug. 31 and sales were up 15% compared to the same period last year. It also had a significant boost in its bottom line, with net income of $1.7 billion rising by 62% year over year.

Profitability has been a big problem for Carnival in the past as shutdowns due to the pandemic crushed its operations. Nowadays, it's back to posting regular profits, but with interest expenses costing the company $431 million in the third quarter, its high debt load is still weighing on the business.

However, the company has been chipping away at its long-term debt, which today totals $26.6 billion, down from $28.5 billion nine months ago.

How cheap is Carnival stock?

Over the past five years, shares of Carnival are down 56% as the business has struggled to win back investors despite its improving results. A combination of high debt and concerns about the economy are undoubtedly weighing on its valuation.

But now with Carnival appearing to turn a corner and its earnings being much stronger than they have been in previous years, investors might want to look at the company again.

Currently, the stock trades at around 15 times its trailing earnings. Since 2020, there has been a lot of noise due to the pandemic, so instead I'll compare the stock's current valuation to what its price-to-earnings multiple (P/E) was averaging in the decade before, between 2010 and 2020.

CCL PE ratio; data by YCharts.

Historically, investors have been paying a higher premium for the business than they are today. And while debt is a concern these days, the company has been making efforts to reduce it.

Plus, as interest rates come down, interest costs will be less of drag on its bottom line, which should make its valuation even more attractive.

Is Carnival stock a good buy today?

The stock has rallied 19% in the past six months as bullishness appears to be building behind the business -- and rightfully so, given its strong results. Investors might still be hesitant because of its high debt load, though, and concerns about the economy also don't help.

The stock is by no means risk-free, but Carnival is experiencing high demand. It is seeing strong booking for 2025 and says it's off to a record start to 2026. There's a lot of predictability in its demand. And with a modest valuation and its numbers potentially getting much better as interest rates come down, I think Carnival has the potential to be one of the best growth stocks to buy right now.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.