Could Carnival Be The Value Stock For Your Portfolio?
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Shares of Carnival Corporation (CCL) trade at 12.7 times earnings, compared with 21.8 for the median S&P 500 company. This discount is a bargain only if the cruise line’s profits turn into cash and its sales keep growing while it adds few new ships. If not, it may be a fair price for a business whose fastest growth is behind it. So how much cash do Carnival’s profits actually bring in?
You Are Buying Profits That Turn Into Cash
A lot, so far. Carnival earned net income of $3.14 billion over the four fiscal quarters ended August 31, 2026, up from $2.64 billion a year earlier. Its operations brought in cash equal to 24.7% of revenue over the same twelve months.
After capital spending, free cash flow came to $3.18 billion. At today’s price that is a free cash flow yield of 7.9%, measured against the stock’s market value.
That cash comes from selling cruises, mostly through Carnival’s North America segment, which brought in $17.6 billion in fiscal 2025, against $8.47 billion for Europe. Customers are also paying ahead: management said on the fiscal Q3 2026 call that customer deposits reached a third-quarter record of about $7.6 billion, up about 7%. So the profits behind the low multiple are turning into cash.
Sales Growth At Carnival Has Slowed Every Year
Growth is the weaker part. Carnival’s revenue grew 22.2% in the twelve months ended August 2024, 7.1% in the twelve months to August 2025, and 5.2% in the latest twelve months. That latest rate falls well under the 11.5% average of those three periods.
The operating margin also slipped, falling to 16.0% in the latest twelve months from 16.4% a year earlier. Furthermore, Carnival is adding few ships. Management guided capacity growth of 1.0% for fiscal 2026 and forecast 0.5% for 2027, saying on the fiscal Q3 2026 call that capacity growth is “pretty fixed for the next half decade.”
So more sales have to come from charging more on a fleet that barely grows. That is what happened in fiscal Q3 2026, when yields, Carnival’s revenue per unit of capacity, rose nearly 2.5%, management said. That growth is real, but slower than the almost 5% yield growth management cited for the same quarter a year earlier.
Carnival Is Paying Down A Heavy Debt Load
Carnival also carries heavy debt, which a P/E does not measure. Total debt equals 62.9% of the company’s market value, compared with 19.5% for the S&P 500 as a whole.
Carnival is cutting this debt. Total debt fell to $25.2 billion at August 31, 2026, from $27.9 billion a year earlier. Two years earlier, in August 2024, it stood at $30.3 billion. During the fiscal third quarter, a second rating agency gave Carnival an investment-grade rating. Separately, management said the company has bought back nearly $1.2 billion of stock to date. That came in the first 6 months of its share repurchase program.
Management has also set its own bar, raising its fiscal 2026 adjusted earnings guidance to $2.24 a share, from $2.22. If sales growth stalls, however, the debt remains, leaving an owner with a heavy balance sheet without the growth.
Carnival’s profits are coming in as cash, and its debt is falling each year. Sales are another matter: Carnival now has to grow by raising prices on a fleet that barely expands. As a holding, Carnival asks you to accept heavier debt and slower growth in return for a low price on profits backed by cash. A buyer at this price is betting that Carnival can keep sales climbing by charging more. Net yield growth, which management guided at about 1.7% in constant currency for fiscal Q4 2026, is the number to watch when Carnival reports in December 2026. Management said that figure includes a 0.6 point drag from accounting for its new loyalty program, and put the underlying rate at approximately 2.3%.
Not Sure Carnival Corporation Is Worth It At This Price?
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