Up Over 50% in 12 Months, Is Carnival Corp Still a Good Buy Right Now?

One of the hottest growth stocks to own over the past year has been that of Carnival Corporation (NYSE: CCL). The cruise ship operator has been soaring in value and while it has dipped after reaching new 52-week highs, it's still up more than 50% in the past 12 months.

The company recently posted a fresh batch of record-breaking numbers, as demand for cruises remains robust. But with the stock taking off as of late and now trading at levels it hasn't been at since 2021, could it be due for a decline, or can it continue to rise higher given how well the business has been doing?

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Carnival posts an all-time high for revenue

On Sept. 29, Carnival released its third quarter numbers, for the period ended Aug. 31. Revenue totaling $8.2 billion for the period rose by a modest rate of 3% year over year, but it marked the 10th straight quarter where it reached a new record. More importantly, however, was the $1.9 billion profit it posted, which was also an all-time high for the company.

Profitability has been a concern for many cruise ship companies since the COVID-19 pandemic, which crippled their businesses and saddled them with tremendous debt. Now, however, Carnival has been delivering far more stable and consistently profitable results. It still has more than $25 billion in long-term debt on its books, but the company says it has "opportunistically refinanced over $11 billion" of it this year, as interest rates have been coming down. By refinancing debt at a lower rate, a company can decrease interest costs and help boost its earnings.

Has the stock become too expensive?

While Carnival's stock is trading at levels it hasn't seen in several years, it's still nowhere near its pre-pandemic highs. In 2019, the stock was often trading at more than $50 -- around twice the price it's at right now.

Despite its recent gains, the travel stock looks modestly priced with respect to profitability; it's trading at a price-to-earnings multiple of 15, and that falls to 12 when looking at forward earnings, which are based on analyst projections. Investors still aren't pricing the stock as highly as they could be, and that's likely due to its high debt load and the economic uncertainty ahead.

However, Carnival says that nearly half of 2026 is already booked, which is in line with how it did a year ago, indicating that demand remains strong. Cruises are often seen as cheaper travel options for people who want to take a vacation but who don't want to spend a lot on flights, hotels, and car rentals. They can often be simpler and more budget-friendly options. And that appears to be evident, with Carnival still showing some good growth.

Carnival's stock still has more room to run

Although Carnival has experienced a massive surge in value recently, the stock has taken a beating since the pandemic that it still hasn't recovered from. While the company's debt load is high, I think many investors are overly concerned with the business as it's shown that it is on a much more positive trajectory. It has reported a positive operating profit in each of the past four quarters, and it's been hitting record numbers along the way.

This is not as risky of a stock as it was a couple of years ago, and even if consumers cut back on discretionary spending, attractively priced cruise options from Carnival could ensure that demand remains strong for the business for the foreseeable future. While its growth rate may not be terribly high right now, the stock's low valuation and much-improved bottom line makes Carnival a compelling investment to load up on today.

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