Royal Caribbean Group (RCL 0.74%) and Carnival Cruise Lines (CCL 0.88%) both took big hits as countries locked down shores and travelers hunkered down during the early days of the pandemic. As the world returns to normalcy, these top cruise providers are slowly returning to full operation, and new bookings increase.

Between the two, one has gained a serious upper hand in recovery. The other has a forward-looking approach that should help it return to pre-pandemic levels over the next few years, and both predict a likely return to profitability in the very near future. Choosing the better buy may come down to your aversion to risk, but the time seems right to pick up cruise line stocks ahead of a likely potential rebound.

The benefits of the world's largest luxury ships

Royal Caribbean Group boasts many of the world's largest cruise ships, delivering an unparalleled level of comfort and safety in many ports around the world. Perhaps the most telling element of its lead over Carnival lies in the company's swift return to positive operating cash flow. Unlike its competitors, the cruise giant reported positive cash flow as recently as its July earnings report. In the same month, it also announced full-fleet operation, returning as many ships to the water for bookings as it had prior to scaling back in early 2020.

July seemed to indicate a turnaround in the company's fortunes, as booking volumes soared 30% over 2019 levels and redemptions from canceled itineraries represented less than 10% of bookings made during this time. The company revised its adjusted earnings per share forecast to $0.05 to $0.25, indicating a likely return to profitability around the bend. The most recent negative earnings report from its competitor, Carnival, may have as much or more to do with Royal Caribbean's most recent share price dip as the news eroded some confidence in the recovering cruise industry.

Expectations of a return to profitability and a focus on refit

Carnival Cruise Lines stock prices dipped sharply on missed projections as of its September earnings report, despite EBITDA returning to positive levels to the tune of $300 million. The company's CEO called the company's return to operations "essentially complete," noting that their newer and more efficient fleet should help drive down the costs that prevented a return to profitability thus far.

Relaxing COVID protocols in the wake of the global pandemic and working to adjust the overall costs associated with operations lies at the heart of Carnival's forward-looking strategy. The earnings report also notes that redemption of future cruise credits, or FCCs, for canceled pandemic itineraries continues to impact the overall profitability of voyages. Cost savings for future voyages may well come from investment in LED lighting systems, HVAC upgrades to shipboard hotels, systems upgrades, and remote energy usage monitoring.

Anyone worried about insolvency or a potential buyout should note that the company has $7.4 billion in liquidity, giving it a very strong likelihood of weathering the storm and coming back out on top.

Is there a clear winner in this cruise matchup?

While Royal Caribbean enjoys a return to normalcy, its operation in foreign markets means that they have an outsized impact on its profitability. Fuel shortages and economic conditions in Europe remain a concern, but the company's forecasts show strong expected growth in the near term. In the long term, the company seems almost undervalued, with share prices close to $35, down sharply by almost $100 from its price before the global pandemic event.

Carnival appears more focused on explaining how it will fare in the years to come instead of the months ahead, and that foresight may well drive investment and success in the long term. The company's $7 share prices remain well below pre-pandemic highs near $55 and even earlier recent highs nearing $70 per share. That indicates a potential 10x return, should Carnival pull off the transformation of a younger, more efficient fleet ready for a post-pandemic world.

Royal Caribbean Group stands as the clear winner as a better buy for a safer investment likely to return to profitability more quickly and with greater strength, but low share prices may give savvy investors a chance to also pick Carnival as a growth bet. Its potential upside remains strong.

Risk vs. reward on the high seas

A strong company emerging from hard times versus a strong potential upside at greater risk poses one of the iconic questions for investors. More risk-averse investors may choose to pick up Royal Caribbean as it continues to emerge strong post-pandemic. It currently offers the better buy, but Grandview Market Research expects the market size of the cruise industry to nearly double by 2028. So a bit of both may be the best buy from a foolish perspective, as the next three to five years may well see great things from these two leaders in entertainment on the high seas.