After a record-breaking 2023 "wave season" -- a period at the start of the year when cruise lines offer promotional discounts to ramp up booking sales -- the industry looks poised for a recovery. Today I'll compare two top cruise line stocks to determine which makes the better buy.

The case for Carnival Corporation

Carnival Corporation (CCL 6.58%) (CUK 7.16%) reported better-than-expected earnings for Q1, and also enjoyed its highest quarterly booking volumes ever during the period.

Delivering $4.4 billion in revenue last quarter, Carnival beat company expectations and exceeded 2022's fourth-quarter revenue by 173%. Occupancy reached 91% -- also above company guidance, and a 7% improvement year over year. 

Even more intriguing is that occupancy grew 7% on higher capacity than in Q1 of 2022. As CEO Josh Weinstein explained during Carnival's first-quarter earnings call, with capacity now 4.5% above 2019 levels, occupancy in the current quarter is expected to approach (but not quite reach) 2019 levels. 

By this summer, Weinstein anticipates "historical occupancies," meaning Carnival could carry more passengers in Q3 than it ever has. Although the Miami-based operator took a net loss of $693 million last quarter, the figure surpassed its guidance for a $750 million to $850 million loss for the period. 

Debt also looms large for Carnival, now at more than three times what it was in 2019. Despite nearly $33 billion in long-term debt, chief financial officer David Bernstein affirmed that Carnival is "beyond the peak" of its total debt. After reaching more than $35 billion last quarter, investors will want to ensure that Carnival's liabilities continue to lessen over time. 

After Q1's record-breaking booking season, there is reason to be cautiously optimistic. Carnival's North American segment set new booking records every single week in January and February, and booking strength followed through into March.

The case for Royal Caribbean 

Earning six times more revenue in 2022 than in 2021, Royal Caribbean (RCL 3.32%) seeks to grow even more in 2023.

In the fourth quarter of 2022, Royal Caribbean's revenue of $2.6 billion dwarfed the $982 million generated during the same period in 2021. These better-than-expected results were largely fueled by onboard revenue generation as well as better close-in bookings amid persistent demand for cruise vacations. 

During the company's Q4 earnings call in February, CFO Naftali Holtz said, "Better cost management and favorable timing of expenses across several categories, lower fuel rates, lower customer acquisition cost, and lower interest expense also contributed to the financial results."

Last December's load factor, or the percentage of guests aboard Royal Caribbean's ships, ended at 95% -- hitting 110% during peak holiday sailings. While the cruise operator endured a net loss of $500 million in the fourth quarter, it marked a significant improvement over 2021's fourth-quarter net loss of $2.6 billion.

Royal Caribbean's long-term debt also increased since 2019, but not to the same degree as Carnival. At just shy of $21 billion, the company's last reported debt stands at two and a half times what it was in 2019. 

Regarding 2023's booking season, CEO Jason Liberty said, "We expected a strong wave season, but what we are currently experiencing has exceeded all expectations even when considering our capacity growth." Royal Caribbean anticipates 14% higher capacities this year than in 2019. 

Which cruise line stock is a better buy?

Since both companies operated at a loss last quarter, I've compared their price-to-sales ratios (P/S), price-to-book ratios (P/B), expanding debt levels, and debt-to-equity ratios (D/E).

Metric Carnival Corporation Royal Caribbean
Market cap $12.4 billion $15.7 billion
Price-to-sales ratio 0.78 1.78
Price-to-book ratio 1.97 5.48
Percent long-term debt change since 2019 238% 153%
Debt-to-equity ratio 5.70 8.15

Data source: Seeking Alpha, YCharts. 

Although Carnival's long-term debt since 2019 grew more than Royal Caribbean's, Carnival has a better (lower) D/E ratio. That means, when compared to shareholder equity, Carnival's liabilities represent a smaller percentage. And with more appealing P/S and P/B ratios, Carnival is today's better buy. 

In addition to watching for continued revenue growth from Carnival, investors should monitor the company's long-term debt to make sure it decreases over time.