Carnival Corp Valuation – February 2019 $CCL

Company Profile (excerpt from Reuters): Carnival Corporation, incorporated on November 21, 1974, is a leisure travel company. The Company is a cruise company of global cruise guests, and a provider of vacations to all cruise destinations throughout the world. The Company operates in four segments: North America, EAA, Cruise Support and, Tour and Other. As of November 30, 2016, the Company operated over 100 cruise ships within a portfolio of global, regional and national cruise brands that sell cruise products, services and vacation experiences in all the vacation geographic areas. The Company’s North America segment includes Carnival Cruise Line, Holland America Line, Princess Cruises (Princess) and Seabourn. The Company’s EAA segment includes AIDA Cruises (AIDA), Costa Cruises (Costa), Cunard, P&O Cruises (Australia), P&O Cruises (the United Kingdom) and ship operations of Fathom. The Company’s Cruise Support segment represents certain of its port and related facilities and other services that are provided for the benefit of its cruise brands and Fathom’s selling, general and administrative expenses. The Company’s Tour and Other segment represents the hotel and transportation operations of Holland America Princess Alaska Tours and three ships that the Company bareboat charter to unaffiliated entities.


Downloadable PDF version of this valuation:

ModernGraham Valuation of CCL – February 2019

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 $39,817,043,115 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.24 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 93.60% Pass
6. Moderate PEmg Ratio PEmg < 20 14.07 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.65 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 0.24 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.13 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

EPSmg $4.11
MG Growth Estimate 15.00%
MG Value $158.06
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $59.53
MG Value based on 0% Growth $34.90
Market Implied Growth Rate 2.79%
Current Price $57.78
% of Intrinsic Value 36.56%

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, 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 Undervalued after growing its EPSmg (normalized earnings) from $1.83 in 2015 to an estimated $4.11 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.79% 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 Carnival Corp revealed the company was trading below its Graham Number of $59.51. The company pays a dividend of $1.95 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.07, which was below the industry average of 31.44, 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 $-22.48.

Carnival Corp performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$22.48
Graham Number $59.51
PEmg 14.07
Current Ratio 0.24
PB Ratio 1.65
Current Dividend $1.95
Dividend Yield 3.37%
Number of Consecutive Years of Dividend Growth 4

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Most Recent Balance Sheet Figures

Balance Sheet Information 11/1/2018
Total Current Assets $2,225,000,000
Total Current Liabilities $9,204,000,000
Long-Term Debt $7,897,000,000
Total Assets $42,401,000,000
Intangible Assets $4,101,000,000
Total Liabilities $17,958,000,000
Shares Outstanding (Diluted Average) 700,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.67
Nov2018 $4.44
Nov2017 $3.59
Nov2016 $3.72
Nov2015 $2.26
Nov2014 $1.56
Nov2013 $1.36
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 $1.62
Nov2002 $1.68
Nov2001 $1.57
Nov2000 $1.60
Nov1999 $1.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.11
Nov2018 $3.59
Nov2017 $2.94
Nov2016 $2.45
Nov2015 $1.83
Nov2014 $1.70
Nov2013 $1.86
Nov2012 $2.19
Nov2011 $2.50
Nov2010 $2.58
Nov2009 $2.66
Nov2008 $2.82
Nov2007 $2.67
Nov2006 $2.42
Nov2005 $2.15
Nov2004 $1.83
Nov2003 $1.63

Recommended Reading:

Other ModernGraham posts about the company

Carnival Corp Valuation – April 2018 $CCL
Carnival Corp Valuation – July 2016 $CCL
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

Other ModernGraham posts about related companies

Wyndham Worldwide Corp Valuation – May 2018 $WYN
Carnival Corp Valuation – April 2018 $CCL
Marriott International Inc Valuation – March 2018 $MAR
Norwegian Cruise Line Holdings Ltd Valuation – Initial Coverage $NCLH
Wyndham Worldwide Corp Valuation – January 2017 $WYN
ILG Inc Valuation – Initial Coverage $ILG
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


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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