Could Royal Caribbean Be a Long-Term Wealth Builder for Patient Investors?​

Royal Caribbean Cruises (NYSE: RCL), the world's second-largest cruise line, has been a fantastic investment over the years.

In 2025, it beat the S&P 500 index, returning about 21% for the year, and over the past five years it has an annualized return of 30%. Taking an even longer view, it has an average annualized return of about 12.6% over the past 10 years, slightly below the 13.8% return of the large-cap benchmark, but still pretty solid numbers.

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The stock tends to move with the markets, as more people tend to purchase cruise tickets when the economy is strong and the stock market is up.

That has been clearly evident during the current bull market, as Royal Caribbean stock has posted a three-year average annualized return of 62%.

Investors that have held Royal Caribbean stock for the past five years are probably very happy with the wealth they have built, but can investors expect that to continue?

New destinations and cruises on the way

There are several reasons to believe that Royal Caribbean stock should continue to outperform and build wealth for investors.

Over this three-year run, Royal Caribbean has reported successive years of record earnings and is on pace to do so again in 2025, which we'll know for sure when fourth-quarter earnings come out Jan. 29. This has helped Royal Caribbean improve its financials and free cash flow, and continually invest.

In the third quarter the company launched a new ship, Star of the Seas, and in December it debuted a new destination, Royal Beach Club Paradise Island in the Bahamas. In 2026, it will debut another destination, Royal Beach Club Santorini in the Greek Isles, and in 2027 it will launch its Celebrity River cruises throughout Europe.

These new offerings are expected to push bookings 10% higher in Q4, and bookings for 2026 are anticipated to be higher than 2025. Further, onboard spending and prices have increased, and that is projected to continue.

Continued growth through 2033

While the shorter-term outlook is promising, so is the longer-term view.

A report published by Cruise Industry News last year projected that Royal Caribbean would continue to gain market share as the largest single brand between now and 2033, widening the gap between Carnival (NYSE: CCL). That's based on anticipated capacity growth of 3% per year through 2033 compared to Carnival's projected 1.1% annual growth rate over that time.

While Carnival is expected to remain the largest cruise line, including all of its brands, with a market share of 32%, Royal Caribbean and all of its brands will be second at around 25%. However, it is worth nothing that Royal Caribbean currently has a market share of 27%, so while the Royal Caribbean brand will grow, its other small cruise lines could lose market share to competitors like Norwegian Cruise Lines and MSC Cruises.

The other key factor for investors right now is Royal Caribbean's cheap long-term valuation. It has a very reasonable forward price-to-earnings ratio of 15, but its long-term, five-year price/earnings-to-growth (PEG) ratio is in value territory at 0.86.

Cruise lines are often affected by macroeconomics, so there could be some blips, but overall, Royal Caribbean stock should continue to be a long-term winner for patient investors.

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