RCL

Royal Caribbean's turnaround is now a fully-formed earnings story, not a hope trade. Revenue has climbed every year from a $1.53B pandemic trough (FY2021) to $17.9B in FY2025 (+8.8% YoY), while net income swung from -$5.26B in FY2021 to +$4.27B in FY2025 (+48.3% YoY). The quality of that growth is what stands out: a 27.4% operating margin, 23.8% net margin, and a 42.5% return on equity are exceptional for water transportation, and diluted EPS of $15.61 (+42.7%) is being amplified by buybacks ($1.16B) against a flat share count (+0.5%). Operating cash flow of $6.46B (+22.8%) comfortably funds the business and leaves roughly $1.2B of free cash after a heavy $5.23B capex year (+60%), the bulk of which is growth investment in new ships and private destinations like the newly opened Paradise Island Royal Beach Club (Dec 2025) — these high-margin owned ports-of-call (Perfect Day at CocoCay, Labadee) structurally lift per-passenger economics.

Valuation does not yet reflect this. At $312.51 the stock trades at 20.0x FY2025 EPS and 4.7x sales — a multiple that would be unremarkable for a no-growth industrial, let alone a company compounding earnings above 40%. On a growth-adjusted basis the PEG is well below 1, and equity grew 32.7% in the year as retained earnings more than doubled (+126.8%) to $5.92B, so the balance sheet is de-risking even as the company returns cash (dividends up 670% to $824M).