Should I exit my Teekay (NYSE:TK) holdings?
 | By Rifka Kats | Macroaxis Story |
Teekay is scheduled to announce its earnings tomorrow. As many millenniums are trying to avoid energy space, it makes sense to examine Teekay a little further and try to understand its current market patterns. We will check if the company can maintain a respectable level of debt while minimizing operating losses.
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Reviewed by Raphi Shpitalnik
Teekay reports 4.7 B of total liabilities with total debt to equity ratio (D/E) of 1.89, which is normal for its line of buisiness. The asset utilization indicator refers to the revenue earned for every dollar of assets a company currently reports. Teekay has an asset utilization ratio of 56.58 percent. This signifies that the company is making $0.57 for each dollar of assets. An increasing asset utilization means that Teekay is more efficient with each dollar of assets it utilizes for everyday operations. Teekay financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Teekay, including all of Teekay's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Teekay assets, the company is considered highly leveraged. Understanding the composition and structure of overall Teekay debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.
Understanding Teekay Total Liabilities
Teekay liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Teekay has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Teekay balance sheet include debt obligations and money owed to different Teekay vendors, workers, and loan providers. Below is the chart of Teekay short long-term liabilities accounts currently reported on its balance sheet. You can use Teekay financial leverage analysis tool to get a better grip on understanding its financial positionHow important is Teekay's Liquidity
Teekay financial leverage refers to using borrowed capital as a funding source to finance Teekay ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Teekay financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Teekay's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Teekay's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Teekay's total debt and its cash.
A Deeper Perspective On Teekay
The big decline in price over the last few months for Teekay created some momentum for traders as it was traded today as low as 2.36 and as high as 2.54 per share. The company executives failed to add value to investors and positioning the company supply of money to exploit market volatility in July. However, diversifying your holdings with Teekay or any similar stocks can still protect your portfolios during high-volatility market scenarios. The stock standard deviation of daily returns for 30 days investing horizon is currently 4.55. This high volatility is attributed to the latest market swings and not so good earnings reports for some of the Teekay partners.
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