Stock Analysis on Net
Stock Analysis on Net

Royal Caribbean Cruises Ltd. (NYSE:RCL)

This company has been moved to the archive! The financial data has not been updated since July 29, 2022.

Dividend Discount Model (DDM)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.

Intrinsic Stock Value (Valuation Summary)

Royal Caribbean Cruises Ltd., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 27.69%
0 DPS01 0.78
1 DPS1 0.28 = 0.78 × (1 + -63.60%) 0.22
2 DPS2 0.17 = 0.28 × (1 + -41.41%) 0.10
3 DPS3 0.13 = 0.17 × (1 + -19.22%) 0.06
4 DPS4 0.14 = 0.13 × (1 + 2.97%) 0.05
5 DPS5 0.17 = 0.14 × (1 + 25.16%) 0.05
5 Terminal value (TV5) 8.60 = 0.17 × (1 + 25.16%) ÷ (27.69% – 25.16%) 2.53
Intrinsic value of Royal Caribbean Cruises Ltd. common stock (per share) $3.03
Current share price $38.71

Based on: 10-K (reporting date: 2021-12-31).

1 DPS0 = Sum of the last year dividends per share of Royal Caribbean Cruises Ltd. common stock. 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.

Required Rate of Return (r)

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.72%
Expected rate of return on market portfolio2 E(RM) 13.44%
Systematic risk of Royal Caribbean Cruises Ltd. common stock βRCL 2.63
 
Required rate of return on Royal Caribbean Cruises Ltd. common stock3 rRCL 27.69%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rRCL = RF + βRCL [E(RM) – RF]
= 4.72% + 2.63 [13.44% – 4.72%]
= 27.69%

Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Royal Caribbean Cruises Ltd., PRAT model

Microsoft Excel
Average Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in thousands)
Common stock dividends — 163,089 618,843 546,689 463,069
Net income (loss) attributable to Royal Caribbean Cruises Ltd. (5,260,499) (5,797,462) 1,878,887 1,811,042 1,625,133
Revenues 1,532,133 2,208,805 10,950,661 9,493,849 8,777,845
Total assets 32,258,355 32,465,187 30,320,284 27,698,270 22,296,317
Shareholders’ equity 5,085,556 8,760,669 12,163,846 11,105,461 10,702,303
Financial Ratios
Retention rate1 — — 0.67 0.70 0.72
Profit margin2 -343.34% -262.47% 17.16% 19.08% 18.51%
Asset turnover3 0.05 0.07 0.36 0.34 0.39
Financial leverage4 6.34 3.71 2.49 2.49 2.08
Averages
Retention rate 0.69
Profit margin -110.21%
Asset turnover 0.24
Financial leverage 3.42
 
Dividend growth rate (g)5 -63.60%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

1 Retention rate = (Net income (loss) attributable to Royal Caribbean Cruises Ltd. – Common stock dividends) ÷ Net income (loss) attributable to Royal Caribbean Cruises Ltd.
= (-5,260,499 – 0) ÷ -5,260,499
= —

2 Profit margin = 100 × Net income (loss) attributable to Royal Caribbean Cruises Ltd. ÷ Revenues
= 100 × -5,260,499 ÷ 1,532,133
= -343.34%

3 Asset turnover = Revenues ÷ Total assets
= 1,532,133 ÷ 32,258,355
= 0.05

4 Financial leverage = Total assets ÷ Shareholders’ equity
= 32,258,355 ÷ 5,085,556
= 6.34

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.69 × -110.21% × 0.24 × 3.42
= -63.60%

Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × r – D0) ÷ (P0 + D0)
= 100 × ($38.71 × 27.69% – $0.78) ÷ ($38.71 + $0.78)
= 25.16%

where:
P0 = current price of share of Royal Caribbean Cruises Ltd. common stock
D0 = the last year dividends per share of Royal Caribbean Cruises Ltd. common stock
r = required rate of return on Royal Caribbean Cruises Ltd. common stock

Dividend growth rate (g) forecast

Royal Caribbean Cruises Ltd., H-model

Microsoft Excel
Year Value gt
1 g1 -63.60%
2 g2 -41.41%
3 g3 -19.22%
4 g4 2.97%
5 and thereafter g5 25.16%

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

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -63.60% + (25.16% – -63.60%) × (2 – 1) ÷ (5 – 1)
= -41.41%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -63.60% + (25.16% – -63.60%) × (3 – 1) ÷ (5 – 1)
= -19.22%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -63.60% + (25.16% – -63.60%) × (4 – 1) ÷ (5 – 1)
= 2.97%