Carnival (CCL 6.24%) (CUK 6.39%) faced tough times in early pandemic days. The company was forced to temporarily halt sailings, and that meant relying on debt to, excuse the pun, stay afloat. But in the years that followed, the world's biggest cruise operator demonstrated its ability to weather the toughest of times and emerge victorious.
The company has worked to pay down a significant amount of debt, reached record revenue levels, returned to profitability, and shown that travelers love its cruises. The stock price has reflected these successes, climbing 50% over five years -- though the stock still hasn't fully recovered its early pandemic losses.
Now, as Carnival continues to sail along its recovery and growth path, could the stock help you become a millionaire? Let's find out.
Image source: Getty Images.
Carnival's focus on profitability
Carnival, as mentioned, struggled just a few years ago, particularly as it faced an enormous wall of debt. But the company made efforts to focus on profitability -- for example, replacing older ships with more fuel-efficient ones, and making moves to boost travelers' onboard spending. Carnival also aggressively paid down debt, focusing on variable-rate borrowings -- a great idea as this made the company less vulnerable to any potential interest rate increases.
NYSE: CCL
Key Data Points
The company also set in motion its SEA Change plan in 2023 to improve sustainability, earnings, and return on invested capital. In the second quarter of last year, Carnival said it achieved and surpassed those financial goals 18 months early.
Most recently, Carnival delivered more good news. The company announced record full-year revenue of more than $26 billion, record adjusted net income of $3.1 billion, and said its advanced booked position remains at record highs -- even at historically high price levels. On top of this, efforts to tackle debt have paid off. The company said it has returned to an investment grade credit rating at Fitch Ratings.
A look at valuation
So, the picture looks bright for Carnival and its shareholders. But can this stock help you become a millionaire? Today, Carnival trades for 12x forward earnings estimates, down from more than 16x a year ago. This reasonable valuation, along with Carnival's fantastic recovery story, could prompt investors to buy the stock -- and result in further gains for the shares in the months to come. The current valuation clearly offers the stock plenty of room to run.
Carnival's recovery has been impressive, and the company's moves to favor efficiency and profitability should boost growth down the road, too. All of this makes me optimistic about Carnival stock. Alone, I wouldn't expect it to make you a millionaire, though -- it's unlikely one stock would do the job. But as part of a diversified portfolio of quality stocks, Carnival, over time, could help you reach the million-dollar mark.
