Better Cruise Stock Buy: Carnival or a 50/50 Split of Royal Caribbean and Norwegian Cruise Line?

When it comes to the the three leading traditional ocean-faring cruise line stocks, the market has a certain pecking order that has been in place for years. Despite being the largest player in terms of revenue, fleet size, and passenger volume, Carnival Corp. (NYSE: CCL) does not command the largest market cap.

Smaller rival Royal Caribbean (NYSE: RCL) wears the market cap crown. It commands a market capitalization of $75 billion to Carnival at $36 billion. Even if we turn to enterprise value to account for each company's leveraged balance sheet, Royal Caribbean packs the largest valuation of $98 billion to Carnival's $60 billion. The smallest Norwegian Cruise Line (NYSE: NCLH) is a distant third, with a mere $7 billion market cap and an enterprise value of $23 billion.

This brings us to today's thought experiment. If you wanted some skin in the traditional cruising market, would you be better off investing it all in Carnival or splitting that stake evenly between Royal Caribbean and Norwegian? It's not an easy decision.

Parting the seas

Before deciding if you would rather have a gold and a bronze medal or a pair of silvers, let's dive into why Royal Caribbean is considered the class act of the industry. Let's start with the year-to-date and five-year performance of the three stocks.

• Carnival: Down 9% in 2026, up 28% over the past five years.
• Royal Caribbean: Up 6% this year, up 254% over the past five years.
• NCL: Down 29% in 2026, down 38% over the past five years.

Royal Caribbean isn't just the only one of the three cruise liners to deliver positive results this year. It has more than tripled over the past five years. Carnival stock is up just 28% over those same five years, and NCL is taking on water.

You can make some money on a cruise ship's floating casino if you're lucky, but Royal Caribbean has earned its upticks. It has historically grown its revenue at a headier pace than Carnival. It was the first of the three cruise lines to return to profitability after the pandemic and reinitiate its quarterly dividend.

Sailing in the right direction again

Cruise line stocks fell out of favor earlier this year. The catalyst is pretty clear. Once Iran restricted access to the Strait of Hormuz after the U.S. and Israeli strikes, it suddenly became dangerous to be on a boat. More importantly, from a macro perspective, oil prices began to soar.

Fuel is a major cost component for cruise lines, and with bookings locked in months if not years ahead of time, margins can contract when expenses walk the plank. Economic concerns can also slow bookings, and we saw a wave of cautious, then disappointing, quarterly results in the first and, subsequently, second quarters of this fiscal year.

The third quarter has been a bullish surprise. When Carnival reported third-quarter results late last month -- its fiscal year ends in November -- it was refreshingly bullish. Royal Caribbean reported its latest financials on Tuesday. It was also a blowout performance.

Both companies delivered bottom-line beats. They also revealed encouraging momentum for forward bookings. The past wasn't as bad as it was feared to be. The future is suddenly brighter.

Anchors aweigh

Historical laggard NCL reports on Thursday. Even if it falls short again, it shouldn't undermine the recovery in bullish market sentiment.

This brings us back to 100% in Carnival or a 50/50 split between Royal Caribbean and NCL. The historical answer is somewhat clear. If you invested $2,000 in Carnival five years ago, you would have $2,560 today. If you invested $1,000 in Royal Caribbean and another grand in NCL, you would have $3,540 and $620 for a total of $4,160.

This year's math is less definitive. $2,000 in Carnival at the start of 2026 would be $1,820. The 50/50 split in Royal Caribbean and NCL would be $1,770.

Carnival is a compelling investment here. It's trading for 11 times next year's analyst profit target. The other two offer valuation extremes. Royal Caribbean has typically commanded a market premium to its rivals, and that's the case now. It's trading for less than 15 times next year's earnings. NCL is trading for less than 11 times earnings. The blended valuation is a year-ahead earnings multiple of 12.5.

You probably can't go wrong with Carnival here at its attractive valuation, just as investors are rotating back into cruise line stocks. I still think Royal Caribbean is the better play, even if it means having the high-risk turnaround player in NCL call shotgun. It's OK to invest in cruise line stocks again. The water is fine -- for now.

Rick Munarriz has positions in Royal Caribbean Cruises. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.