In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)
Weighted Average Cost of Capital (WACC)
FCFF Growth Rate (g)

Carnival Corp. & plc, free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Year	Value	FCFF_t or Terminal value (TV_t)	Calculation	Present value at 13.48%
0¹	FCFF₀	3,460
1	FCFF₁	3,416	= 3,460 × (1 + -1.29%)	3,010
2	FCFF₂	3,434	= 3,416 × (1 + 0.53%)	2,666
3	FCFF₃	3,515	= 3,434 × (1 + 2.36%)	2,405
4	FCFF₄	3,662	= 3,515 × (1 + 4.19%)	2,208
5	FCFF₅	3,883	= 3,662 × (1 + 6.02%)	2,063
5	Terminal value (TV₅)	55,139	= 3,883 × (1 + 6.02%) ÷ (13.48% – 6.02%)	29,294
Intrinsic value of Carnival Corp. & plc capital				41,646
Less: Debt (fair value)				29,728
Intrinsic value of Carnival Corp. & plc common stock				11,918

Intrinsic value of Carnival Corp. & plc common stock (per share)				$9.10
Current share price				$14.82

Based on: 10-K (reporting date: 2023-11-30).

¹ See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Carnival Corp. & plc, cost of capital

	Value¹	Weight	Required rate of return²	Calculation
Equity (fair value)	19,414	0.40	25.42%
Debt (fair value)	29,728	0.60	5.69%	= 5.74% × (1 – 0.84%)

Based on: 10-K (reporting date: 2023-11-30).

¹ US$ in millions

Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,309,995,783 × $14.82
= $19,414,137,504.06

Debt (fair value). See details »

² Required rate of return on equity is estimated by using CAPM. See details »

Required rate of return on debt. See details »

Required rate of return on debt is after tax.

Estimated (average) effective income tax rate
= (-19.35% + -0.21% + 0.22% + 0.17% + 2.32% + 1.71%) ÷ 6
= 0.84%

WACC = 13.48%

FCFF growth rate (g) implied by PRAT model

Carnival Corp. & plc, PRAT model

	Average	Nov 30, 2023	Nov 30, 2022	Nov 30, 2021	Nov 30, 2020	Nov 30, 2019	Nov 30, 2018
Selected Financial Data (US$ in millions)
Interest expense, net of capitalized interest		2,066)	1,609)	1,601)	895)	206)	194)
Net income (loss)		(74)	(6,093)	(9,501)	(10,236)	2,990)	3,152)

Effective income tax rate (EITR)¹		-19.35%	-0.21%	0.22%	0.17%	2.32%	1.71%

Interest expense, net of capitalized interest, after tax²		2,466)	1,612)	1,597)	893)	201)	191)
Add: Cash dividends declared		—)	—)	—)	342)	1,379)	1,378)
Interest expense (after tax) and dividends		2,466)	1,612)	1,597)	1,235)	1,580)	1,569)

EBIT(1 – EITR)³		2,392)	(4,481)	(7,904)	(9,343)	3,191)	3,343)

Short-term borrowings		—)	200)	2,790)	3,084)	231)	848)
Current portion of long-term debt		2,089)	2,393)	1,927)	1,742)	1,596)	1,578)
Long-term debt, excluding current portion		28,483)	31,953)	28,509)	22,130)	9,675)	7,897)
Shareholders’ equity		6,882)	7,065)	12,144)	20,555)	25,365)	24,443)
Total capital		37,454)	41,611)	45,370)	47,511)	36,867)	34,766)
Financial Ratios
Retention rate (RR)⁴		-0.03	—	—	—	0.50	0.53
Return on invested capital (ROIC)⁵		6.39%	-10.77%	-17.42%	-19.66%	8.66%	9.61%
Averages
RR	0.33
ROIC	-3.87%

FCFF growth rate (g)⁶	-1.29%

Based on: 10-K (reporting date: 2023-11-30), 10-K (reporting date: 2022-11-30), 10-K (reporting date: 2021-11-30), 10-K (reporting date: 2020-11-30), 10-K (reporting date: 2019-11-30), 10-K (reporting date: 2018-11-30).

¹ See details »

2023 Calculations

² Interest expense, net of capitalized interest, after tax = Interest expense, net of capitalized interest × (1 – EITR)
= 2,066 × (1 – -19.35%)
= 2,466

³ EBIT(1 – EITR) = Net income (loss) + Interest expense, net of capitalized interest, after tax
= -74 + 2,466
= 2,392

⁴ RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,392 – 2,466] ÷ 2,392
= -0.03

⁵ ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,392 ÷ 37,454
= 6.39%

⁶ g = RR × ROIC
= 0.33 × -3.87%
= -1.29%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value₀ × WACC – FCFF₀) ÷ (Total capital, fair value₀ + FCFF₀)
= 100 × (49,142 × 13.48% – 3,460) ÷ (49,142 + 3,460)
= 6.02%

where:

Total capital, fair value₀ = current fair value of Carnival Corp. & plc debt and equity (US$ in millions)
FCFF₀ = the last year Carnival Corp. & plc free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Carnival Corp. & plc capital

FCFF growth rate (g) forecast

Carnival Corp. & plc, H-model

Year	Value	g_t
1	g₁	-1.29%
2	g₂	0.53%
3	g₃	2.36%
4	g₄	4.19%
5 and thereafter	g₅	6.02%

where:
g₁ is implied by PRAT model
g₅ is implied by single-stage model
g₂, g₃ and g₄ are calculated using linear interpoltion between g₁ and g₅

Calculations

g₂ = g₁ + (g₅ – g₁) × (2 – 1) ÷ (5 – 1)
= -1.29% + (6.02% – -1.29%) × (2 – 1) ÷ (5 – 1)
= 0.53%

g₃ = g₁ + (g₅ – g₁) × (3 – 1) ÷ (5 – 1)
= -1.29% + (6.02% – -1.29%) × (3 – 1) ÷ (5 – 1)
= 2.36%

g₄ = g₁ + (g₅ – g₁) × (4 – 1) ÷ (5 – 1)
= -1.29% + (6.02% – -1.29%) × (4 – 1) ÷ (5 – 1)
= 4.19%

Carnival Corp. & plc (NYSE:CCL)

Present Value of Free Cash Flow to the Firm (FCFF)

Intrinsic Stock Value (Valuation Summary)

Weighted Average Cost of Capital (WACC)

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

FCFF growth rate (g) implied by single-stage model

FCFF growth rate (g) forecast