Is Royal Caribbean Stock A Real Bargain?

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Shares of Royal Caribbean (RCL) trade at 17.6 times earnings, compared with a 22.8 multiple for the median S&P 500 company. The shares lost 2.8% over the past year while the S&P 500 returned 16.5%, and the stock price appears to assume the cruise company’s best growth is over. To be a real bargain, Royal Caribbean must keep turning more of each sale into profit while its sales growth stops slowing. How much of each sale does Royal Caribbean keep as profit today?

Royal Caribbean Keeps More Of Each Sale As Profit

Over the four quarters to June 2026, Royal Caribbean kept 27.3% of its revenue as operating profit. That margin rose from 26.4% a year earlier and tops the 18.7% for the median S&P 500 company. The P/E is low even though profit is rising: net income reached $4.4 billion over those twelve months, compared with $3.6 billion the year before.

On the July 28, 2026 call, management said the company’s ships, destinations and loyalty program have brought in more trips from higher-margin guests. Repeat guests spend 20% to 25% more than other guests. The company also now raises prices on cruises booked close to sailing, shifting away from a past need to discount.

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How Fast Is Royal Caribbean Still Growing?

Sales are expanding more slowly each year so far. Revenue grew 27.7% in the twelve months to June 2024 and 12.1% in the twelve months after that. In the twelve months to June 2026, growth decelerated to 8.7%, trailing the 16.2% average across those three periods. That latest rate still beats the 8.4% posted by the median S&P 500 company.

Management now expects revenue to grow 9% in 2026, down from the 10% it forecast in April. The company said the prolonged conflict in the Middle East has modestly impacted Mediterranean sailings. Most of the 2026 growth will come from 6.6% more capacity, while net yields, management’s measure of pricing, are projected to rise 1.75% to 2.25%.

Is Royal Caribbean Spending More Cash Than It Makes?

Yes, and the P/E does not show it. Free cash flow, the cash left after capital spending, dropped to a negative $416 million over the twelve months to June 2026, compared with $3.59 billion generated a year earlier. Separately, after that period ended, the company agreed in September 2026 to buy half of Caribbean resorts operator Sandals Resorts International for $3 billion, expanding into land-based vacations.

Royal Caribbean carries debt equal to 30.4% of its market value, against 19.7% for the S&P 500. Management cut its 2026 capital spending forecast to $4.7 billion, down from $5.0 billion in April. It also raised its 2026 adjusted earnings per share forecast to $17.80 at the midpoint, from $17.30. If the margin stops rising or sales growth keeps slowing, a buyer is left with a company whose debt is heavier than the index’s and whose free cash flow is negative.

What Would A Royal Caribbean Buyer Be Betting On?

Royal Caribbean is already turning more of each sale into profit, so a buyer at this price is not betting on a fix there. Sales growth is the weaker part of the case. The pace has slowed each year so far, so Royal Caribbean does not yet pass the second part of the test. A buyer is betting that added capacity steadies sales growth, more than that the market has mispriced a sound business. When Royal Caribbean reports in October 2026, revenue growth for fiscal Q3 2026 against management’s forecast of 8% is the number to watch.

Is Too Much Of Your Wealth Riding On One Stock?

Whether Royal Caribbean is a bargain will take time to find out. When one position grows into a large part of your wealth, a sharp fall can hurt your whole plan, and selling to spread the money out can bring a large tax bill. Our partner advisory firm offers a free strategy review of ways to protect a concentrated position and unwind it with less tax.

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