Quarterly results put Icahn Enterprises in focus

Icahn Enterprises (IEP) just released quarterly results that combined a higher Indicative Net Asset Value tied to its CVI holdings with a GAAP net loss and a fresh cash or unit distribution decision for unitholders.

The latest quarterly update has been met with a relatively muted reaction, with the 1-day share price return of 0.67% and 7-day share price return of 0.54% sitting against a 30-day share price decline of 9.84%. A 1-year total shareholder return of 13% contrasts with deeper total shareholder return declines over three and five years. This suggests recent momentum is modest and still framed by a longer history of weaker performance.

If this mix of income and complex exposure interests you, it can be useful to look beyond Icahn Enterprises and see what else is moving in related areas via the 21 top founder-led companies

With the units trading at $7.51 against a $12.00 analyst target and an intrinsic value estimate that sits above the market price, the key question is whether Icahn Enterprises is genuinely undervalued or if the market already reflects its future growth potential.

Preferred Price-to-Sales multiple of 0.5x: Is it justified?

On a simple revenue lens, Icahn Enterprises trades on a P/S of roughly 0.5x, which our data flags as good value versus both peers and the wider Industrials space.

P/S compares the market value of the company to its annual revenue, which can be useful when earnings are negative or volatile. That fits Icahn Enterprises today, with reported revenue of $9,779.0m alongside a net loss of $329.0m and forecasts that it is expected to remain unprofitable over the next 3 years.

Here, the current P/S of 0.5x sits well below the estimated fair P/S of 0.8x. The market could move towards that level if sentiment around future cash generation improves. It is also well below the global Industrials industry average of 0.8x and the peer average of 2.1x, which points to the stock being priced more conservatively than many comparable companies despite revenue growth of 2.7% per year.

Result: Price-to-Sales of 0.5x (UNDERVALUED)

However, the quarterly net loss of $329.0m and the multi segment structure, from energy to pharma, leave plenty of room for earnings volatility and execution setbacks.

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Another view: what the SWS DCF model says

The SWS DCF model points in the same direction as the sales based view, with Icahn Enterprises trading at $7.51 versus an estimated future cash flow value of $8.60, a discount of about 12.6%. Both approaches signal a gap, but is this a cushion or a value trap for you as a unitholder?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Icahn Enterprises for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 47 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If this combination of potential upside and clear risks seems finely balanced, consider forming your own view now by weighing the 2 key rewards and 3 important warning signs

Looking for more investment ideas?

If Icahn Enterprises is only one piece of your watchlist, this is a good moment to widen your search and see what else could suit your goals.

• Target higher potential income by reviewing companies in the 10 dividend fortresses that may align with your need for yield and resilience.
• Spot opportunities that look attractively priced relative to quality by scanning the 47 high quality undervalued stocks before other investors pile in.
• Strengthen your core holdings by focusing on financially robust businesses via the solid balance sheet and fundamentals stocks screener (46 results) while others stay narrowly focused.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.