What is TK's Intrinsic value?

Teekay Corp (TK) Intrinsic Value Analysis

Executive Summary

As of June 9, 2025, Teekay Corp's estimated intrinsic value ranges from $14.82 to $103.22 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $85.21 +889.7%
Discounted Cash Flow (5Y) $80.60 +836.1%
Dividend Discount Model (Multi-Stage) $47.30 +449.3%
Dividend Discount Model (Stable) $14.82 +72.1%
Earnings Power Value $103.22 +1098.9%

Is Teekay Corp (TK) undervalued or overvalued?

With the current market price at $8.61, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Teekay Corp's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.95 1.19
Cost of equity 8.2% 11.5%
Cost of debt 4.0% 4.5%
Tax rate 1.3% 2.0%
Debt/Equity ratio 1 1
After-tax WACC 6.1% 8.0%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.0% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,220 (FY12-2024) to $1,582 (FY12-2034)
  • Net profit margin expansion from 33% to 32%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $81 $6,049M 73.0%
10-Year Growth $85 $6,435M 54.2%
5-Year EBITDA $42 $2,793M 41.5%
10-Year EBITDA $54 $3,861M 23.6%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 63.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.9%
  • Long-term growth rate: 0.5%
  • Fair value: $47.30 (449.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.5% (Low) to 8.2% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $10 to $20
  • Selected fair value: $14.82 (72.1% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $548M
Discount Rate (WACC) 8.0% - 6.1%
Enterprise Value $6,881M - $8,999M
Net Debt $(685)M
Equity Value $7,567M - $9,684M
Outstanding Shares 84M
Fair Value $91 - $116
Selected Fair Value $103.22

Key Financial Metrics

Metric Value
Market Capitalization $719M
Enterprise Value $34M
Trailing P/E 5.38
Forward P/E 1.74
Trailing EV/EBITDA 3.60
Current Dividend Yield 1181.71%
Dividend Growth Rate (5Y) 32.94%
Debt-to-Equity Ratio 1.01

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $25.56
Discounted Cash Flow (5Y) 25% $20.15
Dividend Discount Model (Multi-Stage) 20% $9.46
Dividend Discount Model (Stable) 15% $2.22
Earnings Power Value 10% $10.32
Weighted Average 100% $67.72

Investment Conclusion

Based on our comprehensive valuation analysis, Teekay Corp's weighted average intrinsic value is $67.72, which is approximately 686.5% above the current market price of $8.61.

Key investment considerations:

  • Strong projected earnings growth (33% to 32% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 32.94%

Given these factors, we believe Teekay Corp is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.