Icahn Enterprises

Icahn Enterprises LP receives a 3-star quantitative star rating, illustrating our stance that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 11% discount to our quantitative fair value estimate of $7.49 per share; however, caution is warranted due to this estimate's high uncertainty rating. We require the price/fair value ratio to move a certain amount before the star rating can change. This stability-enhancing buffer is in effect for this stock.

The firm's balance sheet strengthens our quantitative valuation. Leverage can enable a company to invest in growth, potentially boosting shareholder value more than equity financing alone. Reflecting the firm's leverage is its EBITDA/interest coverage ratio of 0.8, which sits in the bottom 20% compared with global peers. Although the firm's ability to cover interest payments with EBITDA is limited, shares could sharply rebound if economic circumstances change or recent investments reduce fears of default. We believe this is a sign that shares could be cheap.

The company's favorable dividend structure is an additional encouraging factor. Dividends represent a stable form of future cash flows returned to shareholders, reducing the perceived risk of a business. The firm's forward dividend yield, for example, falls in the top 1% compared with global peers. Expected dividend payments over the coming year relative to the current share price are favorable, which further promotes our favorable price/fair value ratio.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

This company lacks a competitive advantage, receiving a quantitative economic moat rating of none. Additionally, the firm's moderate financial health score suggests it is acceptably positioned against adverse economic circumstances.