Royal Caribbean Cruises Ltd.RCLNYSE

Overview Intelligence Charts News Fundamentals

DCF Valuation

⚠️Model Warnings

•Perpetuity method produces negative equity value (debt exceeds enterprise value). This suggests distress or model limitations.
•Terminal value represents 674% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Sell

Fair Value: $42.86 per share(market-calibrated)

-85.8%

Upside to Fair Value

Current

$301.31

Pure Model

$-43.29

Fair Value

$42.86

Bull Case

$-23.17

Bear Case

$-61.17

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

Unreachable

Calibrated Growth

75/25 blend

Market price implies assumptions beyond model range. Fair value blends 75% model / 25% market price.

What's Driving This Ratingfor RCL

↓

CapEx normalizing toward maintenance

Historical CapEx is 19.33% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$4.4B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is -5.97% — below the sector mature average of 27.37%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.8B (6.11% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from 9.97% in Year 1 to 1.96% by Year 5 (per analyst consensus). That's below the 3.00% terminal rate, so growth re-accelerates in Years 6-10 — a generous assumption. This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

⚠

Market price exceeds model's maximum

Even with the most optimistic terminal growth the model allows, it can't reach $301.31. The market is pricing in factors beyond the DCF framework — possibly optionality, brand premium, or expectations of margin/growth inflection not yet in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 68.17% indicates efficient cash generation. FCF reaches $2.9B by Year 10 (9.85% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.87

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)12.91%

Cost of Debt

Pre-tax Cost of Debt5.87%

Tax Rate5.00%

After-tax Cost of Debt5.57%

Equity Weight (E/V)78.30%

Debt Weight (D/V)21.70%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (78.30% × 12.91%) + (21.70% × 5.57%)

= 11.31%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$19.7B	$23.0B	$25.5B	$26.7B	$29.0B
EBIT	-$1.2B	-$1.4B	-$1.5B	$133M	$1.8B
Tax	-$59M	-$69M	-$76M	$7M	$89M
NOPAT	-$1.1B	-$1.3B	-$1.4B	$126M	$1.7B
+ Depreciation	$1.6B	$1.9B	$2.1B	$2.2B	$2.4B
- Capex	$3.8B	$3.7B	$3.2B	$2.4B	$1.2B
- Δ NWC	$179M	$186M	$49M	$62M	$84M
Free Cash Flow	-$3.5B	-$3.2B	-$2.6B	-$143M	$2.9B
Discount Factor	0.898	0.725	0.585	0.472	0.342
Present Value	-$3.1B	-$2.3B	-$1.5B	-$68M	$977M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.9B

Terminal Growth Rate3.00%

WACC11.31%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$35.4B

PV of Terminal Value$12.1B

Exit Multiple Method

Year 10 EBITDA$4.2B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$83.8B

PV of Terminal Value$28.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs-$10.3B

PV of Terminal Value$12.1B

Enterprise Value$1.8B

(-) Net Debt$21.8B

Equity Value-$20.0B

Shares Outstanding271M

Price per Share$-73.85

Exit Multiple Method

PV of Projected FCFs-$10.3B

PV of Terminal Value$28.7B

Enterprise Value$18.4B

(-) Net Debt$21.8B

Equity Value-$3.4B

Shares Outstanding271M

Price per Share$-12.72

Pure Model Fair Value

$-43.29

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
9.31%	$-26.01	$-23.64	$-20.90	$-17.68	$-13.85
10.31%	$-36.95	$-35.27	$-33.37	$-31.18	$-28.65
11.31%	$-45.88	$-44.65	$-43.29	$-41.74	$-39.98
12.31%	$-53.30	$-52.39	$-51.37	$-50.25	$-48.98
13.31%	$-59.56	$-58.86	$-58.09	$-57.25	$-56.31

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$-61.17

-120.3% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 2.33

Base Case

$-43.29

-114.4% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.87

Bull Case

$-23.17

-107.7% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.59

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth9.97%

Year 3 Revenue Growth8.76%

Year 5 Revenue Growth1.96%

Year 7 Revenue Growth2.38%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin-5.97%

Terminal EBIT Margin27.37%

Tax Rate5.00%

Historical Capex / Rev19.33%

Terminal Capex / Rev4.00%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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