Norwegian Cruise Line Holdings Ltd Valuation – Initial Coverage $NCLH

Company Profile (excerpt from Reuters): Norwegian Cruise Line Holdings Ltd. (NCLH), incorporated on February 21, 2011, is a global cruise company. The Company operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. The Company had 25 ships with approximately 50,400 Berths, as of May 1, 2017. The Company’s brands offer itineraries to various destinations around the world, including Europe, Asia, Australia, New Zealand, South America, Africa, Canada, Bermuda, Caribbean, Alaska and Hawaii. The Company’s brands offer various features, amenities, and activities, including various accommodations, multiple dining venues, bars and lounges, spa, casino and retail shopping areas and various entertainment choices. All the brands offer a selection of shore excursions at each port of call, as well as hotel packages for stays before or after a voyage.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of NCLH – March 2018

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 $11,839,734,154 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.21 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 160.99% Pass
6. Moderate PEmg Ratio PEmg < 20 16.08 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.12 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 0.21 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.89 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $3.29
MG Growth Estimate 15.00%
MG Value $126.59
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $47.68
MG Value based on 0% Growth $27.95
Market Implied Growth Rate 3.79%
Current Price $52.87
% of Intrinsic Value 41.77%

Norwegian Cruise Line Holdings Ltd 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, poor dividend history. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. 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 Undervalued after growing its EPSmg (normalized earnings) from $0.96 in 2014 to an estimated $3.29 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.79% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Norwegian Cruise Line Holdings Ltd revealed the company was trading above its Graham Number of $50.36. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.08, which was below the industry average of 29.67, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-34.

Norwegian Cruise Line Holdings Ltd receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$34.00
Graham Number $50.36
PEmg 16.08
Current Ratio 0.21
PB Ratio 2.12
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $518,337,000
Total Current Liabilities $2,490,021,000
Long-Term Debt $5,688,392,000
Total Assets $14,094,869,000
Intangible Assets $2,261,357,000
Total Liabilities $8,345,103,000
Shares Outstanding (Diluted Average) 230,202,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.48
Dec2017 $3.31
Dec2016 $2.78
Dec2015 $1.86
Dec2014 $1.62
Dec2013 $0.49
Dec2012 $0.94
Dec2011 $0.71
Dec2010 $0.13
Dec2009 $3.21

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.29
Dec2017 $2.47
Dec2016 $1.87
Dec2015 $1.32
Dec2014 $0.96
Dec2013 $0.79
Dec2012 $0.96
Dec2011 $0.91
Dec2010 $0.90
Dec2009 $1.07

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

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Wyndham Worldwide Corp Valuation – January 2017 $WYN
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Starwood Hotels & Resorts Worldwide Inc Valuation – August 2016 $HOT
Carnival Corp Valuation – July 2016 $CCL
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


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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