DCF Studio

    RCL · NYQ · Consumer Cyclical

    Royal Caribbean Cruises Ltd.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 154.65

    Market price

    USD 245.81

    Implied upside

    -37.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 26.9% of revenue against depreciation of 11.4%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 154.65-37.1%
    Exit multiple
    USD 426.29+73.4%
    Market price
    USD 245.81

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 22.7bnUSD 28.7bnUSD 36.4bnUSD 46.1bnUSD 58.3bn+26.6%
    EBITUSD 3.7bnUSD 4.6bnUSD 5.9bnUSD 7.4bnUSD 9.4bn+26.6%
    NOPATUSD 3.6bnUSD 4.6bnUSD 5.8bnUSD 7.3bnUSD 9.2bn+26.6%
    Add depreciation & amortisationUSD 2.6bnUSD 3.3bnUSD 4.2bnUSD 5.3bnUSD 6.7bn+26.6%
    Less capital expenditureUSD -6.1bnUSD -7.7bnUSD -9.8bnUSD -12.4bnUSD -15.7bn+26.6%
    Less increase in working capitalUSD 1.1bnUSD 1.4bnUSD 1.8bnUSD 2.2bnUSD 2.8bn-26.6%
    Free cashflow to firmUSD 1.2bnUSD 1.5bnUSD 1.9bnUSD 2.4bnUSD 3.0bn+26.6%
    Discount factor0.94840.85320.76750.69040.6210-
    Present valueUSD 1.1bnUSD 1.3bnUSD 1.5bnUSD 1.7bnUSD 1.9bn+13.9%
    Present Value Of The ForecastUSD 7.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.502Reported 1.750, pulled toward 1.0 (Blume)
    Cost of equity13.26%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 65.7bn74.9% of capital
    Total debtUSD 22.0bn25.1% of capital, book value as a proxy
    Tax rate1.6%Effective, capped at statutory
    WACC11.17%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 154.65

    88% of EV

    Forecast FCFF, final year
    USD 3.0bn
    Capex at depreciation, working capital in reinvestment
    USD 9.2bn
    Less reinvestment at g/ROIC (17.1% of NOPAT)
    USD -1.6bn
    Capitalised
    USD 7.7bn
    ROIC (reported)
    14.6%
    Terminal value, undiscounted
    USD 90.5bn
    Terminal value, discounted
    USD 56.2bn
    Enterprise value
    USD 63.6bn
    Less net debt
    USD 21.2bn
    Equity value
    USD 42.4bn

    Exit at 13.1x EBITDA

    Value per shareUSD 426.29

    95% of EV

    Terminal value, undiscounted
    USD 210.4bn
    Terminal value, discounted
    USD 130.6bn
    Enterprise value
    USD 138.0bn
    Less net debt
    USD 21.2bn
    Equity value
    USD 116.8bn

    Spread between methods: 94%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    9.17%220.63229.82240.28252.31266.32
    10.17%179.20185.12191.71199.12207.53
    11.17%146.65150.47154.65159.25164.37
    12.17%120.46122.90125.51128.34131.41
    13.17%98.98100.48102.05103.72105.49

    Outlined: this model. Green text: above today's price of 245.81. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year26.6%35.0%+8.4pp
    EBIT margin16.1%21.2%+5.1pp
    Discount rate11.2%9.1%-2.1pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.