(FORTUNE Magazine) -- Fears of a cooler economy, hurricanes, and high fuel prices have sent investors on vacation from cruise ship operators this year. Shares are down 24%, for example, at industry leader Carnival Corp. (Charts), compared with the S&P's 5% gain. But that could spell opportunity: Passenger and earnings numbers continue to rise, making this floating-hotel company look cheap.

Carnival is trading at 14 times its earnings in the past 12 months, a discount to the S&P's P/E of 17 and to the company's historical average (also 17). This despite the fact that cruising has never been more popular. In 2005 more than 11 million people traveled on vacation liners, according to industry trade group CLIA, a 7% increase from 2004, and a historic high. Analysts expect that growth to continue.

Carnival, whose 81 ships make it the biggest player, has best-in-the-business operating margins in the mid-20s and strong sales growth, which has topped 14% in each of the past two years. Citigroup analyst Liz Osur, who predicts a 20% earnings increase in 2007, thinks the company benefits from the steady influence of the Arison family. CEO Micky Arison is the son of founder Ted Arison, and the family owns about 25% of Carnival's stock. "They are seriously committed to the business," she says, and to "capital-allocation discipline." Osur hails Carnival's ability to deploy cash to increase its fleet while leaving enough to return to shareholders. The company recently completed a $1 billion share buyback while authorizing another billion, and it boasts a healthy 2.7% dividend yield.

Carnival could hit some turbulent waters if the hurricane season is tough this year or if fuel prices rise. But in the long term analysts expect that the aging of the population (older folks make up a disproportionate piece of the cruise market), increases in onboard spending, and international expansion will send this stock full steam ahead.