Carnival Corp. (CCL 3.57%) was decimated by the coronavirus pandemic, as demand became nonexistent due to health concerns, and the business was faced with financial difficulties. Nowadays, however, it's kind of a different story. The company is benefiting from a surge in travel spending. It's evident that consumers crave getting back out and exploring the world again. 

This trend has been a boon for investors. Shares of Carnival are experiencing a bit of a resurgence, up 41% this year. The S&P 500, by comparison, has only risen 9% in 2023. For those who have been on the sidelines, is it time to add Carnival to your portfolio? Here's why I don't think that's such a smart move. 

Carnival has strong momentum on its side 

During the fiscal 2023 first quarter (ended Feb. 28), Carnival posted financial results that exceeded management's internal projections. Revenue of $4.4 billion, up 173% year over year, represented 95% of pre-pandemic levels. The company saw record bookings. And customer deposits totaled $5.7 billion, a record for the first quarter.  

"We are still experiencing a record wave season, which started early, gained strength, and has extended later into the year," CEO Josh Weinstein said on the Q1 2023 earnings call. "We expect these favorable trends to continue based on the traction we're making to our ongoing effort to drive demand globally." 

One thing that investors should keep in mind, though, is the uncertain economic environment. So far, Carnival has demonstrated that it can perform well when other industries, particularly retailers, struggle because of consumers who might not have as much discretionary spending power as a couple of years ago. According to Carnival's latest results, this isn't an issue just yet. But if the situation deteriorates and the global economy enters a recession in the near term, the business might be negatively impacted. 

For now, it appears the leadership team is optimistic. They expect occupancy to be greater than 100% this summer, a scenario made possible when there are more than two passengers in a single cabin. And they see adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) coming in at $4 billion (at the midpoint) versus a $1.7 billion loss on this metric in fiscal 2022. Wall Street analysts forecast revenue to rise 73% in fiscal 2023, so there's no view that things are slowing down. 

Investors should pass on the stock 

Yes, Carnival is up an incredible 41% in 2023, with undeniable momentum that might attract some investors who are interested in that kind of thing. However, zooming out tells us a completely different story.

Over the past five and 10 years, Carnival is actually down an eye-watering 83% and 67%, respectively. To be fair, the stock isn't even close to recovering from the pandemic, a one-time (hopefully) event that investors couldn't have predicted. But it's discouraging that shares are trading at the same price as nearly 30 years ago (adjusted for stock splits). 

Past results aren't indicative of what the future holds, but I don't feel comfortable owning Carnival because it has a clear track record as a poor investment. Even though the stock sells at a price-to-earnings ratio of below 6 (as of May 22), I think it's best to avoid this business. 

It's tempting to want to add Carnival to your portfolio to try and gain from the rebound in travel activity, but a look at the company's terrible financial position paints a different picture.

Carnival is a long way from getting back to positive net income, with a net loss of $6.1 billion last fiscal year. Cash flow from operations was almost $400 million in the first quarter, but this was before taking into account the money needed to reinvest back into the business.

This is a very capital-intensive enterprise, so burning through cash is a normal occurrence. And right now, Carnival carries a whopping debt balance of $35 billion. In a world of higher interest rates, that's not a good position to be in. 

Consequently, I believe this is way too risky of a stock to own.