Royal Caribbean Cruises: Why You Should Disembark

Summary:

• I am giving Royal Caribbean Cruises Ltd. a sell rating.
• RCL has a stellar high-quality earnings and a solid annual free cash flow.
• The company suffers from poor short-term liquidity and has substantial amounts of long-term debt and capital expenditures eating into its cash flow.
• Using a discounted cash flow model taking annual free cash flow as the primary metric, Royal Caribbean is overvalued by 227% from its current intrinsic value of $70.48.
• Though the company is a major player in a rapidly growing industry, my valuation model has already taken a lofty 34.6% growth rate over the next five years into account.

Investment Thesis

I give Royal Caribbean Cruises Ltd. (NYSE:RCL) a sell rating because the company has poor short-term liquidity, a massive amount of long-term debt, and is overvalued by 227% from its current intrinsic value of $70.48, much of which is due to the

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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