Should You Consider Carnival Stock After 7.7% Dip Despite Cruise Industry Momentum in 2025?

Thinking about what to do with Carnival Corporation & right now? You are not alone. This cruise giant has been on a volatile voyage lately, keeping investors guessing and opportunities afloat. The share price recently closed at $28.84, and after a bit of choppy sailing over the last month, with a 7.7% decline in the past 30 days, the stock has still delivered a steady 15.3% gain year to date. Over the last year, Carnival has cruised to an impressive 34.8% return, and those who held on for the long haul have seen eye-popping growth: 275.5% over three years and close to doubling their stake over the last five years.

What is fueling this climb? Investors have noticed a shift in the travel sector, with cruise lines regaining popularity and market watchers reassessing risk across the board. Even with recent volatility and shifting investor sentiment, the company’s fundamentals have drawn renewed interest. That is where things get really interesting. Carnival currently boasts a valuation score of 5 out of 6 possible checks for being undervalued. This means that by most measures analysts use, the stock looks like a bargain, but of course, the full story is always more nuanced.

Let’s dive into how these different valuation approaches stack up and what they actually say about Carnival’s future. Before we wrap it up, I will share an even more insightful way to think about Carnival’s value that goes beyond the usual checklist.

Carnival Corporation & delivered 34.8% returns over the last year. See how this stacks up to the rest of the Hospitality industry.

Approach 1: Carnival Corporation & Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and then discounting them back to the present day. This approach relies on anticipating how much cash the business will generate over time, then determining what that is worth in today's dollars.

Carnival Corporation & currently has a Free Cash Flow (FCF) of $1.46 Billion. Looking ahead, analysts project solid growth in annual cash flows for the next few years, with forecasts estimating $3.94 Billion by 2029. While only the first five years are grounded in outside analyst predictions, longer-term projections provided by Simply Wall St suggest a steady path for the company’s FCF over the next decade.

According to this two-stage model, Carnival’s fair value lands at $30.26 per share. With the stock recently closing at $28.84, this suggests the shares are trading at a 4.7% discount to intrinsic value.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Carnival Corporation &.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Carnival Corporation &'s valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Carnival Corporation & Price vs Earnings (PE)

For companies like Carnival Corporation & that are consistently profitable, the Price-to-Earnings (PE) ratio is a go-to measure of value. The PE ratio tells us how much investors are willing to pay for each dollar of earnings, making it particularly useful for understanding what the market expects in terms of future growth and risk.

In general, a higher PE can signal strong expected earnings growth or a lower perceived risk, while a lower PE might mean investors see slower growth ahead or more uncertainty. Comparing a company's PE to industry and peer benchmarks provides some initial insight, but it does not always capture underlying business differences.

Carnival’s current PE sits at 14.34x. That is significantly below the Hospitality industry average of 23.35x and the peer group average of 26.25x. On the surface, this might look like a bargain, but it is important to dig deeper.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. The Fair Ratio goes beyond basic comparisons by considering Carnival’s unique factors, such as earnings growth outlook, profit margins, size, market risks, and more. This nuanced approach gives a fairer estimate of what investors should pay, based on fundamentals rather than just sector averages.

Carnival’s Fair Ratio is 29.28x, much higher than the current PE of 14.34x. That means Carnival is potentially undervalued on this measure, suggesting the market may be underestimating its earnings potential in the context of its risk and growth profile.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Carnival Corporation & Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative connects your view of a company’s story, whether it will succeed or struggle, to your actual financial forecast and assumed fair value. This lets you clearly see the path from business drivers to investment decision.

On Simply Wall St's Community page, millions of investors use Narratives to go beyond just ticking boxes, turning their understanding of a company’s opportunities and risks into concrete estimates of future revenue, profits, and margins. Narratives let you express in plain language why you think a stock will outperform or lag, and then immediately see what that means for its fair value. By comparing that value to the current price, you can decide whether now is the right time to act.

Narratives are dynamic and automatically update as new company news, earnings, or market data become available, so your perspective always reflects the latest information. For example, with Carnival Corporation & some investors focused on fleet modernization and private destinations project a bullish fair value of $43.00 per share, while others who are more concerned about debt and industry risks set a much lower target of $24.00. Narratives make it easy for you to compare, update, and act on these differing perspectives all in one place.

Do you think there's more to the story for Carnival Corporation &? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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