Say Hello to the Monster Stock That Crushed the Market. Here Are 3 Reasons Why You Should Buy and Hold It for 5 Years.

While past results are never indicative of forward returns, there are investors out there who can't help but look at companies whose shares have performed exceptionally well historically in an effort to find tomorrow's winners.

There's one consumer stock that has crushed the market in the past three years as its share price has surged 168% (as of March 11). This is an encouraging trend that warrants a closer look. Here are three convincing reasons that investors should buy and hold this stock for five years.

Image source: Carnival.

This business continues to post record performance

Investors looking at Carnival (NYSE: CCL) today might have no idea what this business was able to overcome. Its operations were completely decimated during the COVID-19 pandemic, as ships were docked for safety reasons. But since the economic backdrop has normalized, the company has thrived.

In its fiscal 2025 (ended Nov. 30, 2025), Carnival posted year-over-year revenue growth of 6.4%. The top-line figure of $26.6 billion was a record. Carnival also had record deposits of $7.2 billion in the fourth quarter.

Looking ahead, favorable industry tailwinds can propel durable growth. The industry is bringing in younger travelers as well as first-time cruise goers, which opens up the market opportunity. Additionally, cruises provide better value than land-based travel alternatives.

Improving the company's finances

Carnival's growth and demand trends have dramatically benefited the business from a financial perspective. For example, the company is generating rapidly rising profits. Operating income totaled $4.5 billion in fiscal 2025, which was another record. That figure was a major reversal from the $4.4 billion operating loss three years before.

What's more, Carnival's leadership team is slowly cleaning up the balance sheet. The long-term debt total of $24 billion represents a $10 billion reduction since early 2023. The best outcome is that this continues to decrease.

Shares trade at an even cheaper valuation

Besides identifying a high-quality business, investors must also think about the valuation that the market is asking them to pay. If the price is too high, it can result in subpar performance going forward. Thankfully, Carnival doesn't fall into this bucket.

In fact, the valuation has gotten even more attractive recently, given the ongoing conflict taking place in Iran and the Middle East. But even before the introduction of this heightened geopolitical turmoil, Carnival was still a compelling opportunity for long-term investors.

The stock trades at a price-to-earnings ratio (P/E) of 13. This is the price to buy a business whose adjusted diluted earnings per share are projected to increase at a compound annual rate of 12.6% between fiscal 2025 and fiscal 2028, according to consensus analyst estimates. That's an inspiring outlook.

Adding to the optimism, though, is the very real possibility of multiple expansion. The S&P 500 index trades at a P/E ratio of 24.6. Even if Carnival can halfway close the gap, it would imply additional upside of 45%.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.