It's always a good idea to regularly review your portfolio to see which stocks you want to keep, sell, or add to from here. With the S&P 500 down by about 13% since the start of 2022, it's particularly useful as some stocks have taken an especially sharp fall.

For instance, consider cruise company Carnival (CCL -1.61%), which has dropped an eye-popping 51%, or about 4 times more than the S&P 500 over this time period. Does this represent a bargain or an indication that more choppy waters lie ahead?

Someone facing assorted papers and books with both hands across their head.

Image source: Getty Images.

Troubled waters

Certainly, outside factors affected Carnival's results over the past couple of years. These include the onset of the COVID-19 pandemic, higher costs stemming from inflationary pressures, and exiting Russia.

While occupancy rates can get skewed since they exclude ships not in operation, there were 7.7 million passengers carried in the latest fiscal year, which ended on Nov. 30, 2022. That remains below 2019's 12.9 million, which was prior to the pandemic.

While the top line has sharply increased, it remains lower than pre-pandemic levels. Last year, revenue rebounded to $12.2 billion from $1.9 billion. However, that figure was less than 2019's $20.8 billion. The company's red ink continued to flow, too. Last year, Carnival reported a net loss of $6.1 billion.

Right direction?

While the past couple of years have been challenging, Carnival may now have to contend with a recession that would likely hurt results as people cut back on travel. When people lose their jobs, or fear that they will, booking a cruise isn't something high on their priority list. With the Federal Reserve raising interest rates to combat high inflation, many economists forecast an economic slowdown will come shortly.

Even with the economy humming along, Carnival continues to post losses. In the first fiscal quarter (which ended on Feb. 28), it lost $693 million. Revenue was $4.4 billion, which was down by 5% from 2019.

True, the business has recovered from the dark days of the pandemic, but the recent results come during a time of low unemployment. The rate has hovered around 3.5%, but the Federal Reserve projects it will increase to 4.5% this year and stay around that level for the next couple of years. Should a more severe recession come, that rate will undoubtedly climb higher.

Hefty debt load

Carnival vastly increased debt during the pandemic. It ended Q1 with $34.9 billion compared to $11.3 billion at the end of 2019.

Those interest payments have weighed on profitability. The annual expense has gone from 2019's $206 million to $1.6 billion last year. Management expects that to increase to $2 billion this year.

While the dark days of shutdowns seem past us, you can't ignore the potential impact to Carnival from an economic slowdown as well as the company's heavy debt burden. With clouds on the horizon and a potential storm coming, it's best to let this ship sail.