This week, we’ll evaluate an organization that a number of of you requested me to place via The Worth Meter. It’s a holding firm owned by one of many world’s wealthiest and most profitable traders.
Based in 1987, Icahn Enterprises (Nasdaq: IEP) is majority-owned by billionaire investor Carl Icahn and his son, Brett Icahn. Shares of the corporate present traders with publicity to Carl Icahn’s private funding portfolio, which consists of private and non-private firms throughout all kinds of industries – starting from oil and fuel to actual property.
Over the previous a number of months, shares have fallen drastically, dropping as a lot as 65% from a 52-week excessive to a virtually 20-year low.
What was the catalyst for the collapse?
Final Might, brief vendor Hindenburg Analysis launched a scathing report on Icahn Enterprises. It claimed that the corporate was overleveraged, overvalued and paying out its fats dividends utilizing cash from new traders relatively than its money flows.
Naturally, the report scared traders, and it despatched shares plummeting 20% the day it was printed. Just a few months later, the corporate ended up slashing its dividend in half, pushing share costs down even additional.
So as to add insult to damage, the corporate simply introduced a pointy decline in revenues in 2023 in addition to an earnings loss, which is bound to discourage traders much more.
Briefly, the corporate’s shareholders have had a extremely powerful yr.
Icahn Enterprises’ revenues have tended to fluctuate over the previous a number of years, and profitability (as measured by EBITDA, or earnings earlier than curiosity, taxes, depreciation and amortization) has been inconsistent.
However the firm’s free money flows have been in a powerful uptrend lately.
Free money flows reached a whopping $3.4 billion in 2023, up 379% from $717 million in 2022 and up 21,356% from $16 million in 2021.
Among the many greater than 3,600 shares scanned by my up to date system – which I launched in last week’s Value Meter – Icahn Enterprises falls between one and two commonplace deviations above the typical. (Bear in mind, the upper a inventory’s rating, the extra undervalued it’s more likely to be.)
The ratio of the corporate’s enterprise worth to its web belongings, or its EV/NAV ratio, is about 1.4. Which means its acquisition price is just 40% above its web asset worth. (An EV/NAV ratio of 1.4 is about one-fourth of the typical for all eligible shares that had been screened – that’s, shares with optimistic money flows and web belongings.)
Plus, Icahn Enterprises’ trailing 12-month free money circulate was a median of 32% of its web belongings over the previous two quarters, in contrast with a median of 26% amongst eligible firms. In different phrases, it generates more money from its belongings than most firms would.
General, the inventory seems to have been overwhelmed down too harshly.
Icahn Enterprises represents a really numerous funding portfolio with stakes in companies throughout practically each business. Whereas it’s not fairly a high-flying development inventory, its sizable free money circulate development lately shouldn’t be ignored – particularly at right now’s market costs.
The Worth Meter charges shares of Icahn Enterprises as being “Barely Undervalued.”
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