Summer may be a great time for taking a cruise -- but it hasn't been a particularly bright time for Carnival (CCL -0.66%) (CUK -0.88%) shareholders. The world's biggest cruise operator's stock is down by more than 18% since the start of July -- even though it reported positive news in its latest earnings report, such as record bookings and progress on reducing its debt load.

Of course, it's important to put that share price performance into context. Carnival soared by more than 100% in the first half of the year, so it wasn't surprising that a pullback occurred at a certain point. But you still may wonder if this is just a temporary dip, offering you a buying opportunity -- or the beginning of a bigger drop.

Debt to keep afloat

First, let's talk about what may have driven Carnival shares higher in the first place, and that's a business recovery from an extremely difficult time. The pandemic crushed the cruising giant, forcing it to stop sailing and driving it to an annual loss. To keep itself afloat -- excuse the pun -- while its revenues were paused, Carnival took on a massive amount of debt, with total borrowings peaking at more than $35 billion.

After cruising was allowed to resume, as Carnival began to pay down debt, improve earnings, and restructure its operations to support growth, investors hopped back on board, and this drove the stock higher. Carnival offered investors encouraging news in its second-quarter report, with elements showing strong demand for its cruises and a pathway back to profitability.

In the quarter, the company reported record customer deposits and record bookings for future cruises. Carnival's adjusted free cash flow also recently shifted into positive territory, and the company expects it to stay there. This is great news because this free cash flow will help the company attack its debt problem. Adjusted EBITDA came in at the high end of guidance -- another encouraging sign.

Yet in the weeks following the Q2 report, the stock slipped. It's important to look at a few more points from the latest earnings period before deciding whether Carnival is a buy at today's levels. And these points have to do with the efforts it's making now to boost its longer-term growth.

Improving return on invested capital

Carnival has set out a strategic plan it dubbed SEA Change with a trio of three-year goals. The first involves making the operation more sustainable by reducing its carbon footprint and increasing fuel efficiency; the second aims for an increase in profitability per passenger; and the third targets improvement in return on invested capital (ROIC). In fact, Carnival forecasts adjusted ROIC of 12%, which would be twice today's level.

The company's move to replace older ships with newer, fuel-efficient ones, and a decision to generally cut down on new ship orders should help Carnival reach those goals. Today, Carnival says its order book is the lowest it's been "in decades."

These efforts also will leave Carnival with more of the resources it needs to pay down its debt and help it move closer to investment-grade leverage metrics by 2026 -- another one of its goals.

Cruising trends also look encouraging, with bookings for 2024 already at record levels. And the company's marketing investments may be paying off too. Carnival said search performance climbed by 87% in the quarter compared with the same period in 2019.

A long-term view

So should you buy Carnival on the dip? After the stock's enormous gains in the first half of the year, it's possible it will stagnate in the near term. But if you take a long-term view, Carnival stock has plenty of room to run.

 Yes, its debt load remains a headwind, but Carnival has taken steps to manage it -- like recently prepaying more than $1 billion in variable rate borrowings. And Carnival has what it takes to pay down debt over time. The company's efforts to work toward profitability and the generally high demand for Carnival's cruises are two more positive points.

It's impossible to consistently time the market and buy stocks at their very lowest cyclical prices. Instead, it's best to try to buy stocks at reasonable prices, with the idea that they will move considerably higher over time. Today, Carnival trades for a bit more than 1 times sales, down from more than 2 times sales in pre-coronavirus days.

All of this means that from a price and future prospects standpoint, Carnival looks like a solid stock to buy on the dip.