If you thought Carnival (CCL 1.43%) (CUK 1.44%) stock's rebound was finished, think again; it's barely started. Although shares are up 90% from their lows in 2020, the company is still 77% off its prepandemic highs.

And those highs weren't ballooned, unreasonable highs. They reflected an industry leader with market-beating performance, tons of opportunity, and a competitive dividend.

Now that Carnival is past its declines and demonstrating robust performance, why can't it get back up there? Let's see what's happening at Carnival and where it might be in a year from now.

Sales: Soaring

Sales are already at record highs, but they keep increasing. The rebound demand has been incredible, and although there's been concern that it will eventually calm down, it hasn't happened yet. Revenue for the fiscal second quarter (ended May 31) was a best-ever $5.8 billion.

People want to take cruises, and the momentum is such that Carnival's position for the rest of the year is the best ever for both occupancy and price. The company is already booked well into 2025 at high rates and high prices. Management has rebranded some of its fleet to meet the higher demand and work more efficiently.

Demand is likely to be slowing next year at this time, and there could be some lumpiness as it stabilizes to prepandemic levels. But Carnival could also benefit from slowing inflation and lower interest rates, which are expected to be cut later this month and lead to even higher demand.

Profits: Improving

Carnival was a highly profitable company before the pandemic, but it's still working its way back. It has reached positive quarterly net income on a generally accepted accounting principles (GAAP) basis twice now over the past year, including in the second quarter at $92 million, up $500 million from last year.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $1.2 billion in the second quarter, up from $681 million last year. Management is guiding for adjusted EBITDA to increase by 40% for the full year.

Even Carnival's net losses have been hovering near zero, and the company is getting closer to reliable profitability. At this time next year, Carnival could be completely out of the woods and posting annual profits. Analysts are expecting $1.19 in earnings per share (EPS) in 2024 and $1.55 in 2025.

Debt: Shrinking

The big problem with Carnival right now is its huge debt. It's always maintained some debt as part of its operating model; that's not unusual with established, dividend-paying industry leaders. But cruise company took on a gargantuan amount to stay solvent, and that leans on its cash availability, adding risk.

While no new pandemic or other global phenomenon that could wipe Carnival out again is expected anytime soon, the company is susceptible to any issues or changing trends. That's why investors are so concerned about the possibility of slowing demand. If revenue growth doesn't keep up, Carnival's debt payment could be at risk.

So far, so good. It's been paying back the debt as fast as it can while securing operations and cash reserves. The company ended the quarter with $4.6 billion in liquidity after paying off another $1.6 billion and shuffling around some of its debt to optimize its position. It's using cash from operations, which was $2 billion in the second quarter, and adjusted free cash flow of $1.3 billion.

Over the next year, look out for updates about how management is going about debt repayments and liquidity. The company should continue to pay it off through healthy operating and free cash flow.

Valuation: Bargain

Carnival stock is trading at bargain bin levels because of its debt levels. It carries a price-to-sales ratio of 0.9 and a forward one-year price-to-earnings (P/E) ratio of only 10.

As Carnival generates higher profits and reduces its debt, it won't stay this cheap forever. If you have some appetite for risk, Carnival stock should be higher next year and reward you long term.