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 |
Useful Links:
| ModernGraham tagged articles | Morningstar |
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| GuruFocus | SEC Filings |
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:
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Disclaimer:
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.
