For Royal Caribbean (RCL -2.08%)The sky may have turned bluer than the water in which the ships float. The company announced its earnings for the third quarter of 2024, revealing higher bookings and increased forecasts for this year.

Such developments contributed to Royal Caribbean’s stock price rising last year. The question now is whether the rise in stock prices can continue or whether the ship will continue Royal’s bull run.

Royal Caribbean’s results

In the first three quarters of 2024, the company reported revenue of almost $13 billion, up 20% year over year compared to the same period in 2023.

In its Q3 2024 earnings release, CEO Jason T. Liberty cited higher consumer leisure spending as the reason for the increase. Additionally, the load factor increased to 111% in the third quarter; This is an impressive feat considering the industry defines 100% capacity as two people per cabin.

This led to: net income In the first nine months of 2024, it exceeded $2.3 billion, an increase of 64% compared to the previous year. Royal Caribbean kept operating expense growth in check, accounting for most of the increase.

As previously noted, improving results and clear signs of progress following pandemic shutdowns have significantly boosted confidence in the stock, with it rising more than 150% in the past year. This means it is performing significantly better than its two biggest rivals. Carnival Company And Norwegian Cruise Line Holdings.

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Royal Caribbean is looking forward to it

The company says bookings for 2025 are higher than 2024, a year ago. Additionally, analysts predict revenue growth of 19% for 2024, before predicting that growth will slow to 9% in 2025, signaling that the recovery from the pandemic is almost complete.

Despite this slowdown, valuation metrics point to both value and financial recovery. stock P/E ratio Just 23. While that makes it more expensive than its larger rival Carnival, whose shares are worth 20 times earnings, Royal Caribbean still looks cheap. Additionally, its forward P/E A figure above 18 indicates that analysts expect significant profit increases, which bodes well for the stock.

Additionally, its total debt of $21 billion continues to decline, albeit slowly. This represents a significant burden considering the shareholders’ capital of $7 billion. equity.

Fortunately, that hasn’t stopped Royal Caribbean from adding capacity as demand for cruises increases. The company took delivery of two additional cruise ships in the first half of the year and plans to acquire an additional three ships in the next two years and two more through its joint venture with TUI Cruises.

Such gains likely won’t help catch up with Carnival, which accounts for 43% of the industry’s total passenger base, according to Cruise Market Watch. Still, Royal Caribbean remains a major force in the cruise industry with a 27% share, and the added capacity will keep it ahead of third place Norwegian Cruise Line Holdings (NCLH -1.81%)It carries approximately 9% of all cruise passengers. This should be positioned to continue to capture a large portion of the strong demand for cruises.

Investing in Royal Caribbean shares

Given current conditions, it’s probably not too late to buy Royal Caribbean shares. Admittedly, the company lags behind Carnival in passenger numbers, and Carnival remains a cheaper stock from a P/E ratio perspective. Additionally, the size of Royal Caribbean’s debt load is undoubtedly putting a strain on its balance sheet.

However, Royal Caribbean’s stock price growth far outpaced its rivals. Moreover, the strength of occupancy and bookings makes it likely that the company’s additional capacity investments will pay off in the cruise line’s stock.

With its relatively low earnings multiple and all signs pointing to continued growth, owning Royal Caribbean shares will likely still pay off for investors.