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Teekay's Confidence And Adjusted ROA Improvements Contradict Bearish Expectations

Summary

Teekay Offshore Partners LP is expected to see a declining Adjusted ROA (ROA’), but management’s confidence in their better cash profile indicate that this is unwarranted.

TOO is trading at a 1.2x Adjusted Value to Assets Ratio (V/A’), near historical lows.

Management’s confidence in their improving liquidity and sustainable cash flows indicate that market expectations appear unwarranted, and that equity upside and multiple expansion may be justified.

Performance and Valuation Prime™ Chart

The PVP chart below reflects the real, economic performance and valuation measures of Teekay Offshore Partners LP (NYSE:TOO) after making many major adjustments to the as-reported financials. This chart, as well as the detail behind the graphics, can be found here.

The four panels explain the company's historical corporate performance and valuation levels plus consensus estimates for forecast years as well as what the market is currently pricing in, in terms of expectations for profitability and growth.

The apostrophe after ROA', Asset', V/A', and V/E' is the symbol for "prime" which means "adjusted." These calculations have been modified with comprehensive adjustments to remove as-reported earnings, asset, liability, and cash flow statement inconsistencies and distortions. To better understand the PVP chart and the following discussion, please refer to our guide here.

The firm has seen historically volatile ROA' performance, collapsing from a peak of 10% in 2005 to a mere 2% in 2006, before modestly recovering to 6% in 2008. ROA' then ranged from 4%-6% levels in 2008-2014, before climbing to 8% in 2015. Meanwhile, Adjusted Asset (Asset') growth has been largely non-existent outside of the firm's 58%...


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