Assessing Icahn Enterprises (IEP) Valuation: Is the Discount Warranted?

Icahn Enterprises (IEP) has seen its stock move slightly lower over the past week, leaving investors to consider what might be driving the action. In the past month, the shares are down about 1%.

See our latest analysis for Icahn Enterprises.

Icahn Enterprises’ 1-year total shareholder return sits deep in negative territory, down over 33%, reflecting persistent selling pressure and shifts in investor sentiment following a string of challenging quarters. While short-term share price returns also remain weak, momentum has not yet turned a corner for long-term holders.

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With shares trading well below analyst price targets but fundamental challenges persisting, the question for investors is clear: is Icahn Enterprises undervalued at these levels, or is the market already accounting for its future prospects?

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

With Icahn Enterprises currently trading at a price-to-sales (P/S) ratio of 0.5x and a last close price of $8.09, the stock sits at a valuation well below both peer and industry averages. This indicates potential undervaluation by this metric.

The price-to-sales ratio measures how much investors are willing to pay for each dollar of a company’s sales. It is particularly relevant when a company is unprofitable, as is the case here, making earnings-based multiples less meaningful.

This low P/S ratio could suggest the market is discounting the company’s lack of profitability and ongoing challenges. While the low multiple indicates the stock may be underappreciated, it also reflects investor concerns about sustained losses and declining revenue. The fair price-to-sales ratio based on the company’s characteristics is also 0.5x. This means the current multiple is aligned with where the market could settle if expectations remain unchanged.

Compared to the global Industrials industry average of 0.8x and peer average of 1.1x, Icahn Enterprises is valued more conservatively. This highlights just how much skepticism is reflected in its current share price. The match to the estimated fair ratio reinforces that a major upward re-rating may require a fundamental turnaround.

Explore the SWS fair ratio for Icahn Enterprises

Result: Preferred multiple of price-to-sales ratio of 0.5x (ABOUT RIGHT)

However, persistent annual revenue declines and sizable net losses remain key risks that could undermine any argument for sustained undervaluation at current levels.

Find out about the key risks to this Icahn Enterprises narrative.

Another View: Discounted Cash Flow Tells a Similar Story

Switching to the SWS DCF model, we see that Icahn Enterprises is trading at $8.09, just above its calculated fair value of $7.76. This suggests the market price is slightly higher than what the company's future cash flows might support. Are investors being a bit too optimistic, or does the market see something the numbers miss?

Look into how the SWS DCF model arrives at its fair value.

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 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Icahn Enterprises Narrative

If you have a different perspective or want to piece together your own view from the data, you can build a fresh narrative in just minutes with Do it your way.

A great starting point for your Icahn Enterprises research is our analysis highlighting 1 key reward and 3 important warning signs that could impact your investment decision.

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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.

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