Carnival Corp Valuation – July 2016 $CCL

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Carnival Corp (CCL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Carnival Corporation is a leisure travel company. The Company is a cruise company and provides vacations to cruise destinations throughout the world. The Company aggregates its approximately nine global, regional and national cruise brands into North America, and Europe, Australia & Asia (EAA) segments. The North America segment includes Carnival Cruise Line, Princess Cruises (Princess), Holland America Line and Seabourn cruise brands. The EAA segment includes Costa Cruises, AIDA Cruises, P&O Cruises (UK), P&O Cruises (Australia) and Cunard cruise brands. The Company’s Cruise Support segment includes its cruise port and related facilities located in Cozumel, Mexico; Grand Turk, Turks and Caicos Islands; Puerto Plata, Dominican Republic, and Roatan, Honduras. The Tour and Other segment includes Holland America Princess Alaska Tours, a tour company in Alaska and the Canadian Yukon, and approximately three cruise ships.


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Downloadable PDF version of this valuation:

ModernGraham Valuation of CCL – July 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $34,384,252,634 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.20 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -10.75% Fail
6. Moderate PEmg Ratio PEmg < 20 19.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.50 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.20 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.31 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

CCL value chart July 2016

EPSmg $2.34
MG Growth Estimate 1.05%
MG Value $24.80
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $33.94
MG Value based on 0% Growth $19.90
Market Implied Growth Rate 5.43%
Current Price $45.32
% of Intrinsic Value 182.78%

Carnival Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.19 in 2012 to an estimated $2.34 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.43% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

Carnival Corp receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

CCL charts July 2016

Net Current Asset Value (NCAV) -$20.53
Graham Number $55.80
PEmg 19.36
Current Ratio 0.20
PB Ratio 1.50
Current Dividend $1.25
Dividend Yield 2.76%
Number of Consecutive Years of Dividend Growth 2


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Most Recent Balance Sheet Figures

Balance Sheet Information 5/1/2016
Total Current Assets $1,600,000,000
Total Current Liabilities $7,841,000,000
Long-Term Debt $8,183,000,000
Total Assets $39,851,000,000
Intangible Assets $4,324,000,000
Total Liabilities $17,060,000,000
Shares Outstanding (Diluted Average) 753,000,000

Earnings Per Share History

Next Fiscal Year Estimate $3.37
Nov2015 $2.26
Nov2014 $1.59
Nov2013 $1.39
Nov2012 $1.67
Nov2011 $2.42
Nov2010 $2.47
Nov2009 $2.24
Nov2008 $2.90
Nov2007 $2.95
Nov2006 $2.77
Nov2005 $2.70
Nov2004 $2.24
Nov2003 $1.66
Nov2002 $1.73
Nov2001 $1.58
Nov2000 $1.60
Nov1999 $1.66
Nov1998 $1.40
Nov1997 $1.12
Nov1996 $0.98

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.34
Nov2015 $1.84
Nov2014 $1.72
Nov2013 $1.87
Nov2012 $2.19
Nov2011 $2.50
Nov2010 $2.58
Nov2009 $2.66
Nov2008 $2.82
Nov2007 $2.67
Nov2006 $2.43
Nov2005 $2.17
Nov2004 $1.85
Nov2003 $1.65
Nov2002 $1.63
Nov2001 $1.55
Nov2000 $1.47

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – May 2015
Carnival Corporation Annual Valuation – 2015 $CCL
14 Companies in the Spotlight This Week – 4/12/14
Carnival Corporation (CCL) Annual Valuation – 2014

Other ModernGraham posts about related companies

Marriott International Inc Valuation – July 2016 $MAR
Starwood Hotels & Resorts Worldwide Inc. Analysis – July 2015 Update $HOT
Carnival Corporation Annual Valuation – 2015 $CCL
Marriott International Inc. Annual Valuation – 2015 $MAR
Wyndham Worldwide Corporation Annual Valuation – 2014 $WYN
Starwood Hotels & Resorts Annual Valuation – 2014 $HOT
Carnival Corporation (CCL) Annual Valuation – 2014


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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