Has RCL Stock Been Good for Investors?

There have certainly been some serious waves crashing against the cruise industry in recent years. Between the prolonged COVID-19 shutdown in 2020 and this summer's wave of documentaries resurfacing some of the more troublesome experiences on watery vacations, one would think that investors in cruise line stocks are taking on water.

This isn't the case. If investors chose well -- as in Royal Caribbean (NYSE: RCL) -- they would have easily beaten the market over the past one, three, and five years. The world's most valuable cruise company by market cap has done a lot of things right in navigating these choppy waters. Let's take a closer look at how this cruise line operator has been able to climb the rock wall of worry.

Image source: Getty Images.

One year

Royal Caribbean has risen a modest 12% over the past year, barely beating out the S&P 500 (SNPINDEX: ^GSPC) with its 11.6% return. The gap was wider this summer. The cruise line operator's stock has declined nearly 20% over the past three months, most of that coming in the days immediately after posting poorly received financial results in late October.

Revenue rose 5% for Royal Caribbean's third quarter, its weakest top-line growth since resuming stateside operations in the summer of 2021. Adjusted earnings rose a better-than-expected 11% -- and the cruise line did boost its full-year guidance on the bottom line -- but it wasn't enough to please the market. Despite a healthy backlog of bookings for future sailings, the near-term economic uncertainty has investors jittery about consumers' ability to spring for big-ticket purchases.

Three years

RCL stock's strongest margin of victory comes from this timeline. The shares have soared 350% over the past three years, a lot better than the market's still-respectable 66% jump during that time. The recovery for the industry itself started to pick up as travel and COVID-testing restrictions eased.

It also helps that folks have been willing to pay more for a cruise vacation than they did before the pandemic. It didn't take long for Royal Caribbean to reach and exceed its previous high-water marks. In 2023, it shattered its 2019 record for annual revenue. A year later, it broke its former profitability high, bringing back its quarterly dividend. It's been a spectacular turnaround for Royal Caribbean in the last three years, and the stock price reflects that.

Five years

The stock has gained 224% over five years, almost tripling the S&P 500's 82% return. It's not as dazzling a beat as the three-year run, but it spent most of the first year in this timeline dealing with a "No Sail Order," and then gradually bringing its fleet back to capacity through the second year.

Royal Caribbean is a successful recovery story. Its trailing revenue is 59% higher than its 2019 peak. It could also be a successful investment at this point. It's trading for less than 15 times forward earnings.

The near-term economic concerns are real, but with its healthy flow of 2026 bookings coming in at higher price points, the lifeboats may not be necessary. Royal Caribbean is cruising along, in more ways than one.

Rick Munarriz has positions in Royal Caribbean Cruises. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.