Royal Caribbean Cruises Ltd. (NYSE:RCL) is in a very different place today than it was a few years ago. Back then, the stock was largely a bet on the cruise business getting back on its feet. That bet has already played out. Royal Caribbean now operates 71 ships across Royal Caribbean, Celebrity Cruises and Silversea, along with its 50% stake in TUI Cruises. The company also has some of the industry’s best-known brands, private destinations and a large base of repeat customers. In addition, it is also expanding beyond cruises, with its Sandals deal raising an interesting question about whether the move will strengthen its vacation ecosystem or stretch the company too far. Those are valuable advantages in a business where scale and brand recognition matter.
So, the interesting part of the RCL story now is not the recovery. It is figuring out whether the stock still offers enough value after the recovery has already happened.
The earnings story has changed
Royal Caribbean’s recent numbers show just how much the business has improved. The company brought in $4.83 billion of revenue in the second quarter of 2026, up from $4.54 billion a year earlier. Diluted EPS was $4.20, while adjusted EPS came in at $4.21. Higher capacity and pricing helped drive the increase in revenue, while strong demand and cost control supported earnings. However, the balance sheet doesn’t look very good because of the company’s capital spending. Read more here.
Management is also expecting another strong year. It raised its 2026 adjusted EPS guidance to $17.73-$17.87, which would put earnings roughly 14% above 2025 levels. Diluted EPS was $10.94 in 2024 and climbed to $15.61 in 2025. Adjusted EPS reached $15.64 last year. At this point, calling Royal Caribbean a post-pandemic recovery story doesn’t really capture what is happening. The company has already recovered and is now growing from a much higher earnings base.
The stock doesn’t look especially expensive
The stock is trading at 14.51 times trailing earnings and 11.40 times forward earnings. Its PEG ratio was 0.95, while the price-to-sales ratio was 3.41 and the enterprise-value-to-EBITDA multiple was 11.61. The forward P/E stands out.
Investors are paying about $14.51 for every dollar of earnings Royal Caribbean Cruises Ltd. has already generated. Looking ahead, that multiple falls to 11.40 times expected earnings. For a company that is still growing earnings at a double-digit rate, that isn’t an aggressive valuation on the surface. There is a small but important catch here. The 11.40x forward P/E reflects analysts’ earnings estimates. It is not necessarily calculated using Royal Caribbean’s own 2026 adjusted EPS guidance of $17.73-$17.87. So investors shouldn’t take the share price and divide it by management’s guidance and expect to get exactly 11.40x.
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But the recovery is no longer doing the heavy lifting
This is probably the most important thing to consider with RCL. A few years ago, investors could make a fairly straightforward argument: cruise demand is coming back, ships are returning to service, and earnings should recover. There was a lot of room for improvement.
That argument is much harder to make today because so much of the recovery has already happened. Now, Royal Caribbean needs to keep growing. There are reasons to think it can. The company continues to add ships and capacity, customers are spending money onboard, and its private destinations give it another way to generate revenue. Management expects 6.6% capacity growth in 2026, along with 1.75%-2.25% constant-currency net yield growth. If those trends continue, the current valuation could prove quite reasonable.
However, there is another side to the story. Cruise ships are expensive, and Royal Caribbean has to keep spending to expand its fleet and destinations. The company also carries significant debt, which makes interest costs an important part of the equation. The third-quarter outlook gives investors something to think about. Capacity is expected to grow 8.5%, while constant-currency net yields are expected to be roughly flat.
In other words, some of the company’s growth is coming from having more capacity rather than from getting substantially more revenue from each unit of existing capacity. That isn’t necessarily a problem. It just means investors need to look beyond headline revenue growth.
Is RCL cheap?
Royal Caribbean shouldn’t be taken as a deep-value stock. However, at around 11.40x forward earnings, it also doesn’t look like a stock where investors are paying an extreme price for growth. The difference comes down to what happens next. The company finished 2025 with adjusted EPS of $15.64 and expects roughly $17.80 in 2026. If earnings continue climbing after that, today’s valuation could look quite attractive in hindsight.
If growth slows sharply once the post-pandemic boost is completely gone, the picture changes. That is why RCL is an interesting valuation story today. Investors aren’t really paying for the old recovery anymore. They are paying for the company’s ability to keep growing after the recovery. And that is a much more important test for the stock.
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This article is originally published at Insider Monkey.
