Picking cruise stocks these days is like shooting fish in a barrel, but in a bad way: If you miss your shot, the barrel's going to spring a leak, and that's a situation that never ends well on a ship. 

Consider that Carnival (NYSE:CCL) (NYSE:CUK)Royal Caribbean International (NYSE:RCL), and Norwegian Cruise Line Holdings (NYSE:NCLH) have already shed between 75% and 82% of their peak values in the market's recent sell-off. Which stock is the best bargain at this point?

We're going to set Carnival aside for now. It's the industry's largest player, but Royal Caribbean and NCL have some interesting attributes that make them stand out for risk-tolerant investors these days. Royal Caribbean sports the most attractive margins of the three, and NCL offers some speculative appeal as the smallest of the three leading players. NCL stock has also taken the biggest hit since it peaked alongside Royal Caribbean earlier this year, but let's go over some of the reasons Royal Caribbean is the better cruise stock right now. 

A paddle boarder dressed as Santa with presents in two paddles toward a Royal Caribbean ship.

Image source: Royal Caribbean International.

Davy Jones' locker

The entire cruise industry is out of favor right now, so it's important to take some of the attractive trailing valuations in stride. Royal Caribbean stock is trading at 3.7 times last year's earnings -- and NCL is going for a mere 2.5 earnings multiple -- but it will take several years before either company approaches last year's profit levels. We were in a buoyant economy that was expanding for more than a decade, when mainstream America wasn't petrified about the notion of setting sail on a crowded ship with a contagious virus on board. 

Microscopic earnings multiples are also tricky to lean on in this industry, where all three players are highly leveraged. Royal Caribbean and NCL command enterprise values of $18.3 billion and $8.9 billion, respectively, more than double and in NCL's case more than triple the market caps used to derive P/E multiples. 

Both companies do have comparable valuations if we lean on enterprise value to arrive at trailing revenue and EBITDA ratios. Here's where all three of the publicly traded players currently stand, according to data from S&P Global Market Intelligence.

Cruise Line Enterprise Value to Revenue Enterprise Value to EBITDA
Carnival 1.0 3.8
Royal Caribbean 1.7 4.8
Norwegian Cruise Line 1.4 4.6

Data source: S&P Global Market Intelligence. 

Revenue will recover faster than earnings and EBITDA in the coming years. The three lines will have to discount aggressively, and passengers with canceled sailings are being given huge concessions to push their sailings out instead of asking for refunds. However, when the industry does bounce back, it's easy to see why Royal Caribbean could be a leader here. 

Royal Caribbean generated nearly $11 billion in revenue last year, considerably more than NCL at $6.5 billion. Carnival naturally owns a much larger fleet than both of its smaller rivals, but in an industry where scalability matters, you have to give the edge to Royal Caribbean. In terms of margins, Royal Caribbean is well ahead of both Carnival and NCL. 

There's nothing wrong with NCL's net profit margins in the low teens in each of the past few years. Royal Caribbean has been in the high teens, between 17% and 19% over the past three years. Carnival and NCL aren't as efficient as Royal Caribbean has historically been in turning revenue into earnings. It will take a long time before margins approach those levels. But if you're buying depressed stocks based on turnaround scenarios a few years out, you have to like Royal Caribbean's chances. 

The next few quarters will be horrific for the industry, and even when the coast is clear for ships to begin sailing again, there are going to be a rough few reports for investors to stomach. The industry has a reputation to restore, and exotic ports of call ring hollow with the world bracing for a recession. All three stocks are risky, and we saw last week how even Carnival's once beefy dividend is now off the table. However, with Royal Caribbean posting the strongest top-line growth among the three players last year and historically coming through with the healthiest margins, the winner heading into this crisis should be the winner as the industry claws its way out. All three stocks are risky investments right now, but between Royal Caribbean and NCL, it's hard not to go with Royal Caribbean at this point.