Royal Caribbean: Bargain or Slowdown?

Royal Caribbean's stock is trading at a lower earnings multiple than the S&P 500 median, suggesting its best growth may be over. However, the company has significantly increased its operating profit margin, retaining 27.3% of revenue as profit in the four quarters leading up to June 2026, up from 26.4% a year prior. This improved profitability, alongside higher repeat guest spending and dynamic pricing, has driven net income to $4.4 billion.

Despite increased profits, sales growth has slowed, decelerating from 27.7% in the twelve months to June 2024 to 8.7% in the twelve months to June 2026. Management now forecasts 9% revenue growth for 2026, impacted by the Middle East conflict. Furthermore, free cash flow turned negative, reaching -$416 million in the twelve months to June 2026, a sharp decline from the $3.59 billion generated the previous year. The company also plans a $3 billion acquisition of Sandals Resorts International and carries higher debt than the S&P 500 average.