Unsurprisingly, Carnival (CCL 1.99%) was decimated when the coronavirus pandemic brought travel to a complete halt, and the business is still trying to fight its way back to where it was a few years ago. Luckily for shareholders, Carnival's recent progress is a sign of hope. But some issues still remain. 

With shares down 88% from their peak of $66.19, set in January 2018, is it time to buy this top cruise line stock? 

Benefiting from strong demand 

In the most recent fiscal quarter (Q1 2023, ended Feb. 28), Carnival generated revenue of $4.4 billion, up 175% year over year. That quarterly sales figure was 95% of the revenue registered in Q1 2019, something that's being closely watched by the management team. Revenue outperformed the leadership team's own internal expectations. 

As consumers focus their spending on travel and experiences, which had to be put on hold for much of the past few years, demand for Carnival's cruises is strong. The most recent quarter showed the highest booking volumes in the history of the business. And CEO Josh Weinstein mentioned in a recent interview that the company is "over 70% booked for the remainder of the year." Given that it's only the end of March right now, that's a pretty good trend. What's more, customer deposits hit a record of $5.7 billion during the three-month period. 

The company continues to deal with headwinds from unfavorable fuel prices and currency rates. But what's impressive is that Carnival is seeing such strong demand at a time when its prices are also rising. This clearly bodes well for the rest of the year as there could still be untapped pricing power in the near term. Carnival served 2.7 million passengers in the quarter, a huge jump from 1 million in the year-ago period. 

While adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) has its fair share of critics, Carnival's management expects this figure to come in at $4 billion for the current fiscal year. That would be a huge reversal from the $1.7 billion adjusted EBITDA loss in fiscal 2022. The leadership team also sees occupancy of 100% this year. Wall Street is also optimistic as consensus analyst estimates call for revenue growth of 72% this fiscal year versus 2022. 

Some unfavorable attributes 

Despite undoubtedly benefiting from strong demand from travelers, Carnival has some negative characteristics that investors need to be aware of before they set sail to stock ownership. For starters, Carnival is an incredibly cyclical business, uncomfortably exposed to the whims of the economy. In robust times, the company can post strong numbers. But in recessionary scenarios, growth can be hard to come by, an issue plaguing airlines and hotels, too.

Even during the latest fiscal quarter, when revenue surged, Carnival posted a net loss of $693 million. And for the entirety of fiscal 2022, the company's net loss was an eye-watering $6.1 billion. In fact, the business hasn't generated a positive profit since the first quarter of 2020. 

Then there's the balance sheet, which is saddled with over $30 billion of debt. This is a capital-intensive operation (investing in and maintaining a global fleet of ships isn't cheap), so it's not a surprise that Carnival is in a less-than-ideal financial position, making the picture cloudier for shareholders. 

What should investors do? 

With the stock down 88% from its peak and down 52% over the past year, investors could be looking to scoop up the stock as it's been beaten down over the past few years. After all, Carnival is currently trading at a compelling price-to-sales multiple below one. This means the stock is selling at a cheaper valuation than even rivals Norwegian Cruise Line Holdings and Royal Caribbean. 

While this stock might be tempting, I'm not so convinced. Until Carnival can once again reach sustainable profitability, as well as lower its debt burden, investors are better off passing on the stock.