Intrinsic value of Carnival - CCL

Previous Close

$65.94

  Intrinsic Value

$66.69

stock screener

  Rating & Target

hold

+1%

  Value-price divergence*

-7%

Previous close

$65.94

 
Intrinsic value

$66.69

 
Up/down potential

+1%

 
Rating

hold

 
Value-price divergence*

-7%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CCL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 47.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.30
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
Revenue, $m
  16,389
  17,454
  18,563
  19,716
  20,918
  22,169
  23,474
  24,835
  26,255
  27,737
  29,285
  30,903
  32,593
  34,361
  36,210
  38,145
  40,170
  42,290
  44,511
  46,836
  49,273
  51,827
  54,503
  57,309
  60,250
  63,335
  66,570
  69,963
  73,522
  77,256
  81,173
Variable operating expenses, $m
 
  4,589
  4,862
  5,146
  5,442
  5,750
  6,071
  6,407
  6,756
  7,121
  7,502
  7,610
  8,026
  8,461
  8,917
  9,393
  9,892
  10,414
  10,960
  11,533
  12,133
  12,762
  13,421
  14,112
  14,836
  15,596
  16,392
  17,228
  18,104
  19,024
  19,988
Fixed operating expenses, $m
 
  9,452
  9,688
  9,930
  10,178
  10,433
  10,694
  10,961
  11,235
  11,516
  11,804
  12,099
  12,401
  12,711
  13,029
  13,355
  13,689
  14,031
  14,382
  14,741
  15,110
  15,487
  15,875
  16,271
  16,678
  17,095
  17,523
  17,961
  18,410
  18,870
  19,342
Total operating expenses, $m
  13,318
  14,041
  14,550
  15,076
  15,620
  16,183
  16,765
  17,368
  17,991
  18,637
  19,306
  19,709
  20,427
  21,172
  21,946
  22,748
  23,581
  24,445
  25,342
  26,274
  27,243
  28,249
  29,296
  30,383
  31,514
  32,691
  33,915
  35,189
  36,514
  37,894
  39,330
Operating income, $m
  3,071
  3,414
  4,013
  4,640
  5,298
  5,987
  6,709
  7,468
  8,264
  9,100
  9,979
  11,194
  12,166
  13,189
  14,265
  15,397
  16,590
  17,846
  19,168
  20,562
  22,030
  23,577
  25,207
  26,925
  28,736
  30,644
  32,655
  34,774
  37,008
  39,362
  41,843
EBITDA, $m
  4,809
  5,285
  5,984
  6,716
  7,482
  8,284
  9,125
  10,007
  10,932
  11,902
  12,921
  13,992
  15,117
  16,299
  17,542
  18,850
  20,226
  21,674
  23,197
  24,801
  26,490
  28,268
  30,141
  32,113
  34,189
  36,377
  38,680
  41,107
  43,663
  46,355
  49,191
Interest expense (income), $m
  211
  308
  344
  381
  420
  460
  502
  546
  592
  639
  689
  741
  795
  852
  911
  973
  1,038
  1,106
  1,177
  1,251
  1,329
  1,411
  1,497
  1,586
  1,680
  1,779
  1,883
  1,991
  2,105
  2,224
  2,349
Earnings before tax, $m
  2,828
  3,106
  3,669
  4,259
  4,878
  5,526
  6,207
  6,922
  7,672
  8,461
  9,290
  10,454
  11,371
  12,337
  13,354
  14,424
  15,552
  16,740
  17,992
  19,311
  20,701
  22,166
  23,711
  25,339
  27,055
  28,865
  30,772
  32,783
  34,903
  37,138
  39,494
Tax expense, $m
  49
  839
  991
  1,150
  1,317
  1,492
  1,676
  1,869
  2,072
  2,285
  2,508
  2,822
  3,070
  3,331
  3,605
  3,895
  4,199
  4,520
  4,858
  5,214
  5,589
  5,985
  6,402
  6,841
  7,305
  7,793
  8,309
  8,851
  9,424
  10,027
  10,663
Net income, $m
  2,779
  2,267
  2,678
  3,109
  3,561
  4,034
  4,531
  5,053
  5,601
  6,177
  6,782
  7,631
  8,301
  9,006
  9,748
  10,530
  11,353
  12,220
  13,134
  14,097
  15,112
  16,181
  17,309
  18,497
  19,750
  21,071
  22,464
  23,932
  25,479
  27,111
  28,830

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  603
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  38,881
  40,781
  43,371
  46,066
  48,873
  51,798
  54,846
  58,026
  61,344
  64,807
  68,424
  72,203
  76,153
  80,283
  84,603
  89,124
  93,855
  98,809
  103,997
  109,431
  115,124
  121,090
  127,343
  133,899
  140,772
  147,979
  155,537
  163,464
  171,780
  180,504
  189,657
Adjusted assets (=assets-cash), $m
  38,278
  40,781
  43,371
  46,066
  48,873
  51,798
  54,846
  58,026
  61,344
  64,807
  68,424
  72,203
  76,153
  80,283
  84,603
  89,124
  93,855
  98,809
  103,997
  109,431
  115,124
  121,090
  127,343
  133,899
  140,772
  147,979
  155,537
  163,464
  171,780
  180,504
  189,657
Revenue / Adjusted assets
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
Average production assets, $m
  17,201
  18,327
  19,491
  20,702
  21,964
  23,278
  24,648
  26,077
  27,568
  29,124
  30,750
  32,448
  34,223
  36,079
  38,021
  40,052
  42,179
  44,405
  46,736
  49,178
  51,737
  54,418
  57,228
  60,174
  63,263
  66,502
  69,898
  73,461
  77,198
  81,119
  85,232
Working capital, $m
  -5,383
  -5,201
  -5,532
  -5,875
  -6,233
  -6,606
  -6,995
  -7,401
  -7,824
  -8,266
  -8,727
  -9,209
  -9,713
  -10,240
  -10,791
  -11,367
  -11,971
  -12,603
  -13,264
  -13,957
  -14,683
  -15,444
  -16,242
  -17,078
  -17,955
  -18,874
  -19,838
  -20,849
  -21,910
  -23,022
  -24,190
Total debt, $m
  9,399
  9,835
  10,897
  12,002
  13,153
  14,352
  15,602
  16,906
  18,266
  19,686
  21,169
  22,718
  24,338
  26,031
  27,802
  29,656
  31,596
  33,627
  35,754
  37,982
  40,316
  42,762
  45,326
  48,013
  50,831
  53,786
  56,885
  60,135
  63,545
  67,122
  70,874
Total liabilities, $m
  16,284
  16,720
  17,782
  18,887
  20,038
  21,237
  22,487
  23,791
  25,151
  26,571
  28,054
  29,603
  31,223
  32,916
  34,687
  36,541
  38,481
  40,512
  42,639
  44,867
  47,201
  49,647
  52,211
  54,898
  57,716
  60,671
  63,770
  67,020
  70,430
  74,007
  77,759
Total equity, $m
  22,597
  24,061
  25,589
  27,179
  28,835
  30,561
  32,359
  34,235
  36,193
  38,236
  40,370
  42,600
  44,930
  47,367
  49,916
  52,583
  55,375
  58,297
  61,358
  64,564
  67,923
  71,443
  75,133
  79,000
  83,055
  87,307
  91,767
  96,444
  101,350
  106,497
  111,898
Total liabilities and equity, $m
  38,881
  40,781
  43,371
  46,066
  48,873
  51,798
  54,846
  58,026
  61,344
  64,807
  68,424
  72,203
  76,153
  80,283
  84,603
  89,124
  93,856
  98,809
  103,997
  109,431
  115,124
  121,090
  127,344
  133,898
  140,771
  147,978
  155,537
  163,464
  171,780
  180,504
  189,657
Debt-to-equity ratio
  0.416
  0.410
  0.430
  0.440
  0.460
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.560
  0.570
  0.580
  0.580
  0.590
  0.590
  0.600
  0.600
  0.610
  0.610
  0.620
  0.620
  0.620
  0.630
  0.630
  0.630
Adjusted equity ratio
  0.587
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590
  0.590

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,779
  2,267
  2,678
  3,109
  3,561
  4,034
  4,531
  5,053
  5,601
  6,177
  6,782
  7,631
  8,301
  9,006
  9,748
  10,530
  11,353
  12,220
  13,134
  14,097
  15,112
  16,181
  17,309
  18,497
  19,750
  21,071
  22,464
  23,932
  25,479
  27,111
  28,830
Depreciation, amort., depletion, $m
  1,738
  1,871
  1,971
  2,076
  2,184
  2,298
  2,416
  2,539
  2,668
  2,802
  2,942
  2,797
  2,950
  3,110
  3,278
  3,453
  3,636
  3,828
  4,029
  4,239
  4,460
  4,691
  4,933
  5,187
  5,454
  5,733
  6,026
  6,333
  6,655
  6,993
  7,348
Funds from operations, $m
  5,578
  4,138
  4,649
  5,185
  5,745
  6,332
  6,947
  7,592
  8,268
  8,978
  9,724
  10,428
  11,251
  12,116
  13,026
  13,982
  14,989
  16,048
  17,163
  18,336
  19,572
  20,872
  22,242
  23,685
  25,204
  26,804
  28,489
  30,265
  32,134
  34,104
  36,178
Change in working capital, $m
  444
  -317
  -330
  -344
  -358
  -373
  -389
  -406
  -423
  -442
  -461
  -482
  -504
  -527
  -551
  -577
  -603
  -632
  -662
  -693
  -726
  -761
  -798
  -836
  -877
  -919
  -964
  -1,011
  -1,061
  -1,113
  -1,167
Cash from operations, $m
  5,134
  4,456
  4,980
  5,528
  6,103
  6,705
  7,336
  7,997
  8,691
  9,420
  10,185
  10,910
  11,755
  12,643
  13,577
  14,559
  15,592
  16,680
  17,824
  19,029
  20,298
  21,633
  23,040
  24,521
  26,081
  27,723
  29,453
  31,276
  33,195
  35,216
  37,345
Maintenance CAPEX, $m
  0
  -1,483
  -1,580
  -1,680
  -1,785
  -1,893
  -2,007
  -2,125
  -2,248
  -2,377
  -2,511
  -2,651
  -2,797
  -2,950
  -3,110
  -3,278
  -3,453
  -3,636
  -3,828
  -4,029
  -4,239
  -4,460
  -4,691
  -4,933
  -5,187
  -5,454
  -5,733
  -6,026
  -6,333
  -6,655
  -6,993
New CAPEX, $m
  -3,062
  -1,126
  -1,164
  -1,211
  -1,261
  -1,314
  -1,370
  -1,429
  -1,491
  -1,556
  -1,625
  -1,698
  -1,775
  -1,856
  -1,942
  -2,032
  -2,126
  -2,226
  -2,331
  -2,442
  -2,559
  -2,681
  -2,810
  -2,946
  -3,089
  -3,239
  -3,397
  -3,563
  -3,737
  -3,921
  -4,113
Cash from investing activities, $m
  -3,323
  -2,609
  -2,744
  -2,891
  -3,046
  -3,207
  -3,377
  -3,554
  -3,739
  -3,933
  -4,136
  -4,349
  -4,572
  -4,806
  -5,052
  -5,310
  -5,579
  -5,862
  -6,159
  -6,471
  -6,798
  -7,141
  -7,501
  -7,879
  -8,276
  -8,693
  -9,130
  -9,589
  -10,070
  -10,576
  -11,106
Free cash flow, $m
  1,811
  1,846
  2,236
  2,637
  3,057
  3,497
  3,959
  4,444
  4,953
  5,487
  6,049
  6,561
  7,183
  7,837
  8,525
  9,250
  10,013
  10,818
  11,665
  12,558
  13,500
  14,492
  15,538
  16,641
  17,804
  19,031
  20,324
  21,687
  23,125
  24,641
  26,239
Issuance/(repayment) of debt, $m
  711
  1,039
  1,062
  1,105
  1,151
  1,199
  1,250
  1,304
  1,360
  1,420
  1,483
  1,549
  1,620
  1,693
  1,771
  1,853
  1,940
  2,031
  2,127
  2,228
  2,334
  2,446
  2,564
  2,688
  2,818
  2,955
  3,099
  3,250
  3,409
  3,577
  3,753
Issuance/(repurchase) of shares, $m
  -2,300
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,614
  1,039
  1,062
  1,105
  1,151
  1,199
  1,250
  1,304
  1,360
  1,420
  1,483
  1,549
  1,620
  1,693
  1,771
  1,853
  1,940
  2,031
  2,127
  2,228
  2,334
  2,446
  2,564
  2,688
  2,818
  2,955
  3,099
  3,250
  3,409
  3,577
  3,753
Total cash flow (excl. dividends), $m
  185
  2,886
  3,298
  3,742
  4,208
  4,696
  5,209
  5,747
  6,313
  6,907
  7,532
  8,111
  8,802
  9,530
  10,296
  11,103
  11,953
  12,849
  13,792
  14,786
  15,834
  16,938
  18,102
  19,329
  20,622
  21,986
  23,423
  24,938
  26,534
  28,218
  29,992
Retained Cash Flow (-), $m
  1,174
  -1,464
  -1,528
  -1,590
  -1,656
  -1,726
  -1,799
  -1,876
  -1,957
  -2,043
  -2,134
  -2,230
  -2,331
  -2,437
  -2,549
  -2,667
  -2,792
  -2,923
  -3,061
  -3,206
  -3,359
  -3,520
  -3,689
  -3,868
  -4,055
  -4,252
  -4,459
  -4,677
  -4,906
  -5,147
  -5,400
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,422
  1,770
  2,152
  2,552
  2,971
  3,410
  3,871
  4,355
  4,864
  5,398
  5,881
  6,472
  7,093
  7,747
  8,436
  9,162
  9,926
  10,731
  11,580
  12,475
  13,418
  14,413
  15,461
  16,567
  17,734
  18,963
  20,260
  21,628
  23,071
  24,592
Discount rate, %
 
  4.70
  4.94
  5.18
  5.44
  5.71
  6.00
  6.30
  6.61
  6.94
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.77
  11.31
  11.88
  12.47
  13.09
  13.75
  14.44
  15.16
  15.92
  16.71
  17.55
  18.42
  19.35
PV of cash for distribution, $m
 
  1,358
  1,607
  1,849
  2,064
  2,250
  2,404
  2,524
  2,609
  2,658
  2,670
  2,612
  2,559
  2,474
  2,360
  2,221
  2,061
  1,887
  1,702
  1,512
  1,322
  1,137
  962
  799
  651
  521
  408
  312
  234
  171
  122
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Carnival Corporation 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. The Company's North America segment includes Carnival Cruise Line, Holland America Line, Princess Cruises (Princess) and Seabourn. 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. Its 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. Its 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.

FINANCIAL RATIOS  of  Carnival (CCL)

Valuation Ratios
P/E Ratio 17.2
Price to Sales 2.9
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 9.3
Price to Free Cash Flow 23.1
Growth Rates
Sales Growth Rate 4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 33.5%
Cap. Spend. - 3 Yr. Gr. Rate 7.3%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 36.7%
Total Debt to Equity 41.6%
Interest Coverage 14
Management Effectiveness
Return On Assets 7.6%
Ret/ On Assets - 3 Yr. Avg. 5.5%
Return On Total Capital 8.6%
Ret/ On T. Cap. - 3 Yr. Avg. 5.9%
Return On Equity 12%
Return On Equity - 3 Yr. Avg. 8.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 42.7%
Gross Margin - 3 Yr. Avg. 39%
EBITDA Margin 29.1%
EBITDA Margin - 3 Yr. Avg. 24.1%
Operating Margin 18.7%
Oper. Margin - 3 Yr. Avg. 15.4%
Pre-Tax Margin 17.3%
Pre-Tax Margin - 3 Yr. Avg. 12.1%
Net Profit Margin 17%
Net Profit Margin - 3 Yr. Avg. 11.9%
Effective Tax Rate 1.7%
Eff/ Tax Rate - 3 Yr. Avg. 1.6%
Payout Ratio 35.2%

CCL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CCL stock intrinsic value calculation we used $16389 million for the last fiscal year's total revenue generated by Carnival. The default revenue input number comes from 2016 income statement of Carnival. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CCL stock valuation model: a) initial revenue growth rate of 6.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.7%, whose default value for CCL is calculated based on our internal credit rating of Carnival, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Carnival.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CCL stock the variable cost ratio is equal to 26.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9221 million in the base year in the intrinsic value calculation for CCL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Carnival.

Corporate tax rate of 27% is the nominal tax rate for Carnival. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CCL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CCL are equal to 105%.

Life of production assets of 11.6 years is the average useful life of capital assets used in Carnival operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CCL is equal to -29.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $22597 million for Carnival - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 723.632 million for Carnival is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Carnival at the current share price and the inputted number of shares is $47.7 billion.

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COMPANY NEWS

▶ [$$] Cruise Ships Steer Clear of Irmas Wake   [Sep-15-17 11:42PM  The Wall Street Journal]
▶ Cruise Stocks Hit Anew Amid Profit Worries   [12:24PM  The Wall Street Journal]
▶ Is It The Right Time To Buy Carnival Corporation (CCL)?   [Sep-12-17 12:55PM  Simply Wall St.]
▶ Federated, Carnival, Alphabet climb; Regeneron skids   [Sep-11-17 04:30PM  Associated Press]
▶ See Markets React to Hurricane Irma in 8 Charts   [11:10AM  The Wall Street Journal]
▶ Cunard Debuts Additional 2019 Voyages   [09:00AM  PR Newswire]
▶ Cunard Announces Three for All Sale   [10:07AM  PR Newswire]
▶ The Latest: Death toll 31 as 6 more fatalities confirmed   [Aug-30-17 11:05PM  Associated Press]
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▶ Yahoo Finance Live: Market Movers - Aug 28th, 2017   [07:20AM  Yahoo Finance Video]
▶ 3 Dividend Stocks That Are Minting Money   [Aug-27-17 11:20AM  Motley Fool]
▶ Cruise Stocks: Not Out Of Steam Yet   [Aug-24-17 10:15AM  Barrons.com]
▶ Port Tampa Bay gets five more cruises to Havana   [Aug-17-17 03:30PM  American City Business Journals]
▶ Carnival CEO on Trumps remarks about Charlottesville   [05:03PM  Fox Business Videos]
▶ ETFs with exposure to Carnival Corp. : August 14, 2017   [Aug-14-17 04:17PM  Capital Cube]
▶ The dark side of cruises   [Aug-12-17 09:30AM  MarketWatch]
▶ Call of the week: Best stocks for a dollar bear market   [Aug-11-17 01:25PM  Yahoo Finance]
Financial statements of CCL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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