Are You Overpaying For Royal Caribbean Stock Versus Its Rivals

Royal Caribbean (RCL) stock trades at 17.2 times earnings. That multiple stands as the highest of the three cruise lines in its peer group, compared with 11.5 for Carnival. Buyers at that price appear to assume Royal Caribbean will keep getting guests to pay more for cruises and onboard extras, and keep growing faster than its rivals. So what does the extra price buy you?

Royal Caribbean Leads Its Rivals On Margin And Growth

The extra price buys a more profitable business. Over its latest four fiscal quarters, Royal Caribbean kept 27.3% of its revenue as operating income, compared with 16.0% for Carnival over its own latest four. Royal Caribbean also posted faster revenue growth, rising 8.7% against 5.2% for Carnival.

Investors pay about 50% more for each dollar of Royal Caribbean's earnings than for Carnival's. Norwegian Cruise Line trades cheaper and grows slower as well. In this peer group, the highest price comes with the fastest growth and the widest margin.

How Royal Caribbean Gets Guests To Pay More

Royal Caribbean's higher prices are holding so far. On the fiscal Q2 2026 call held on July 28, 2026, management said the company can now raise prices on cruises booked close to sailing instead of discounting them as it used to do.

Guests also spend more once they book. Management said onboard spending and purchases made before the cruise came in above prior years, and customers bought more than half of onboard revenue before they boarded.

Repeat guests spend 20% to 25% more, according to management, and they made up a larger share of total guests than a year earlier. Buyers may be paying for that spending per guest.

Is Royal Caribbean's Sales Growth Holding Up?

Not as well. Royal Caribbean's revenue growth has slowed each year. It dropped from 27.7% in the four quarters ended June 30, 2024, to 12.1% over the next four, and the pace fell again over the latest four quarters.

Management also trimmed its outlook in July. The company now expects revenue to grow 9% in fiscal 2026, down from its 10% forecast in April. Management said the conflict in the Middle East had modestly weighed on bookings for some near-term sailings, mainly in the third quarter. It guided third-quarter revenue growth of 8%.

How Much Cash Is Royal Caribbean Keeping?

None, once its spending is counted. Over its latest four quarters, Royal Caribbean's free cash flow, the cash left after spending on the business, sat negative at $0.416 billion against net income of $4.4 billion.

The company ended June with $23.5 billion of debt, compared with $0.875 billion of cash. In September, it agreed to pay $3 billion for half of Sandals Resorts International, a Caribbean resorts operator. Royal Caribbean has little room for a slip with that debt, the Sandals deal to pay for, and no free cash flow to cover them. If pricing or growth fades, a buyer would be paying the group's highest multiple for a business losing its lead.

The stock price appears to assume Royal Caribbean will keep getting more from each guest and keep growing faster than its two rivals. Those higher prices are holding so far, on management's account. Growth is less secure. It has slowed each year, and management trimmed its forecast. Royal Caribbean's third-quarter revenue growth, measured against management's guide, is the number to watch in the report expected on or around October 27, 2026.

How To Act On RCL?

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