Yahoo Finance Why Is Icahn Enterprises Trading at a Premium?
Icahn Enterprises: Why Did It Miss Analysts' Expectations in 1Q16?
Icahn Enterprises’ value of assets
The (net asset value), also referred to as the net book value or book value, helps us determine a fund’s value. Generally, it is the value of assets minus the value of liabilities. To calculate Icahn Enterprises’ (IEP) NAV per share, we divide the NAV by the number of total outstanding units.
Icahn’s major investments
At the end of 1Q16, IEP’s market value of subsidiaries stood at $5.6 billion ($7.8 billion at the end of 4Q15). The value of unlisted companies was $4.7 billion ($3.2 billion in 4Q15). The rise in the value of unlisted companies is due to the increase in equity attribution from IEH Auto Parts, Pep Boys, and Trump Entertainment. The ratio of value of unlisted companies is 1.2x (2.4x in 4Q15).
Major investments include CVR Energy (CVII) and Federal-Mogul (FDML), an auto parts company. Like all other refining stocks, CVI’s share price sharply corrected. CVR stock is at $20, down 50% from $40 a year prior. IEP has made a proposal to buy out minority holders in Federal-Mogul.
Is Icahn trading at a premium or discount?
On May 5, 2016, IEP closed at $57.45 per share. The company’s asset value at the end of 1Q16 was approximately $5.0 billion. There were 132 million units outstanding in 1Q16. Therefore, the NAV per share at the end of 1Q16 was $38.30 per unit. IEP’s units have generally traded at a premium to its NAV, as investors will pay a premium to invest along with Carl Icahn.
Icahn Enterprises’ peers include Berkshire Hathaway (BRK-B), Leucadia National (LUK), and Loews (L). Between May 2015 and May 2016, IEP fell by ~37.4%, while the SPDR S&P 500 ETF (SPY) fell by 3.1% during the same period. On yearly basis up until May 5, 2016, Leucadia, Loews, and Berkshire Hathaway fell by 34%, 4%, and 2%, respectively. What does the analyst community have to say about Icahn Enterprises? We’ll look at analyst recommendations in the next part of this series.
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