Could Dividend Policy Changes Signal a New Direction for Icahn Enterprises Stock in 2025?

• Curious if Icahn Enterprises is a hidden value play or a stock to avoid? Here is a breakdown of where the current price stands and what it could mean for investors deciding whether now is the time to buy or watch from the sidelines.
• While shares have nudged up 2.2% over the past week, they are still down about 11% year-to-date and more than 10% lower compared to this time last year, highlighting both volatility and shifting sentiment.
• Much of this price action follows heightened attention after Icahn Enterprises announced changes to its dividend policy and strategic investments. These developments have been frequent headlines and are shaping how the stock is being perceived by both bulls and bears.
• According to our valuation checks, Icahn Enterprises currently scores 3 out of 6, which means it looks undervalued on half the metrics we track. Here are some different ways you might value this kind of business, and at the end of the article, we will show you an even better way to get the full picture.

Find out why Icahn Enterprises's -10.2% return over the last year is lagging behind its peers.

Approach 1: Icahn Enterprises Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model projects a company's future cash flows and discounts them back to the present, with the aim of showing what the business is really worth based on its ability to generate cash. For Icahn Enterprises, this valuation approach uses a two-stage Free Cash Flow to Equity model and incorporates current and projected cash flows over the next decade.

The company’s latest twelve months (LTM) Free Cash Flow stands at $70.89 million. Analysts expect declining cash flows over the next five years, with projections dropping to $24.58 million by 2026. In subsequent years, further declines are extrapolated, bringing the estimated Free Cash Flow to $5.57 million in 2035. These figures, provided in US dollars, reflect rather cautious expectations for future growth.

Based on these projections, the DCF calculation estimates the intrinsic value at 0.15 per share. With the current market price significantly higher than this figure, the model suggests Icahn Enterprises may be overvalued by about 5145.7%.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Icahn Enterprises may be overvalued by 5145.7%. Discover 927 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Icahn Enterprises.

Approach 2: Icahn Enterprises Price vs Sales

For businesses like Icahn Enterprises, the Price-to-Sales (P/S) ratio is a practical way to value the stock, especially when profits are volatile or negative but revenues remain steady. This metric is often preferred for companies where earnings may be irregular, as it focuses on the company’s top-line performance rather than bottom-line profitability. This offers investors a clearer sense of valuation relative to sales generated.

It is important to note that growth expectations and risk levels help determine what constitutes a "normal" or "fair" multiple for any company. Generally, companies with bright growth prospects or lower perceived risks can justify higher multiples. In contrast, slower-growing or riskier companies typically warrant a discount.

Currently, Icahn Enterprises trades at a P/S ratio of 0.52x, which is below both the industry average of 0.84x and the peer group average of 1.15x. This initial comparison suggests the stock may be attractively valued on a sales basis. Simply Wall St's proprietary “Fair Ratio,” which accounts for company-specific characteristics such as growth profile, risks, margins, industry conditions, and market size, provides a more tailored benchmark. For Icahn Enterprises, the Fair Ratio is 0.63x.

Since the company’s current P/S of 0.52x is only 0.11 below the Fair Ratio of 0.63x, the valuation appears to be in the right zone by this method, with only a mild discount to its tailored fair value.

Result: ABOUT RIGHT

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Icahn Enterprises Narrative

Earlier, we mentioned that there is an even better way to understand valuation. Let’s introduce you to Narratives. A Narrative is a clear and approachable story that you create about a company, combining your perspective on its future with the numbers, such as your estimates of fair value, revenue, earnings, and margins. By linking a company’s story to a specific financial forecast and an estimated fair value, Narratives move beyond just the numbers to offer a holistic investment view.

Narratives are simple and accessible tools available to all users on Simply Wall St’s Community page, trusted by millions of investors. They help you compare a company’s fair value to its current price and give you clarity on whether it may be a good time to review your investment position. The best part is that Narratives are automatically updated as soon as new news or earnings data arrives, ensuring your valuation stays relevant.

For example, while one Icahn Enterprises Narrative might present an optimistic fair value well above today’s price, another more cautious estimate might suggest the opposite. This means you can explore a range of perspectives and decide on your own approach.

Do you think there's more to the story for Icahn Enterprises? Head over to our Community to see what others are saying!

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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