Intrinsic value of Icahn Enterprises - IEP

Previous Close

$52.15

  Intrinsic Value

$9.31

stock screener

  Rating & Target

str. sell

-82%

Previous close

$52.15

 
Intrinsic value

$9.31

 
Up/down potential

-82%

 
Rating

str. sell

We calculate the intrinsic value of IEP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 8.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  7.25
  18.00
  16.70
  15.53
  14.48
  13.53
  12.68
  11.91
  11.22
  10.60
  10.04
  9.53
  9.08
  8.67
  8.30
  7.97
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
Revenue, $m
  16,096
  18,993
  22,165
  25,607
  29,315
  33,281
  37,499
  41,965
  46,673
  51,618
  56,799
  62,213
  67,862
  73,747
  79,871
  86,240
  92,860
  99,740
  106,890
  114,320
  122,043
  130,074
  138,428
  147,122
  156,173
  165,601
  175,427
  185,672
  196,359
  207,513
  219,159
Variable operating expenses, $m
 
  20,454
  23,851
  27,538
  31,508
  35,755
  40,273
  45,056
  50,097
  55,394
  60,942
  66,627
  72,676
  78,979
  85,537
  92,358
  99,448
  106,816
  114,473
  122,430
  130,701
  139,302
  148,249
  157,559
  167,252
  177,349
  187,872
  198,844
  210,289
  222,234
  234,706
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  17,659
  20,454
  23,851
  27,538
  31,508
  35,755
  40,273
  45,056
  50,097
  55,394
  60,942
  66,627
  72,676
  78,979
  85,537
  92,358
  99,448
  106,816
  114,473
  122,430
  130,701
  139,302
  148,249
  157,559
  167,252
  177,349
  187,872
  198,844
  210,289
  222,234
  234,706
Operating income, $m
  -1,563
  -1,461
  -1,686
  -1,930
  -2,193
  -2,475
  -2,774
  -3,091
  -3,425
  -3,776
  -4,143
  -4,414
  -4,814
  -5,232
  -5,666
  -6,118
  -6,588
  -7,076
  -7,583
  -8,110
  -8,658
  -9,228
  -9,820
  -10,437
  -11,079
  -11,748
  -12,445
  -13,172
  -13,930
  -14,721
  -15,548
EBITDA, $m
  -530
  -264
  -308
  -356
  -407
  -462
  -521
  -583
  -648
  -717
  -789
  -864
  -942
  -1,024
  -1,109
  -1,197
  -1,289
  -1,385
  -1,484
  -1,587
  -1,694
  -1,806
  -1,922
  -2,043
  -2,168
  -2,299
  -2,436
  -2,578
  -2,726
  -2,881
  -3,043
Interest expense (income), $m
  662
  623
  703
  1,008
  1,340
  1,696
  2,078
  2,483
  2,913
  3,366
  3,841
  4,340
  4,860
  5,404
  5,970
  6,559
  7,171
  7,808
  8,470
  9,158
  9,872
  10,615
  11,387
  12,191
  13,027
  13,898
  14,805
  15,750
  16,735
  17,763
  18,836
Earnings before tax, $m
  -2,184
  -2,084
  -2,389
  -2,939
  -3,533
  -4,171
  -4,851
  -5,574
  -6,338
  -7,141
  -7,984
  -8,753
  -9,675
  -10,635
  -11,636
  -12,677
  -13,759
  -14,884
  -16,053
  -17,268
  -18,530
  -19,843
  -21,208
  -22,628
  -24,106
  -25,646
  -27,250
  -28,922
  -30,665
  -32,484
  -34,383
Tax expense, $m
  36
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -1,128
  -2,084
  -2,389
  -2,939
  -3,533
  -4,171
  -4,851
  -5,574
  -6,338
  -7,141
  -7,984
  -8,753
  -9,675
  -10,635
  -11,636
  -12,677
  -13,759
  -14,884
  -16,053
  -17,268
  -18,530
  -19,843
  -21,208
  -22,628
  -24,106
  -25,646
  -27,250
  -28,922
  -30,665
  -32,484
  -34,383

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,637
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  33,335
  36,247
  42,300
  48,869
  55,944
  63,513
  71,564
  80,086
  89,070
  98,508
  108,395
  118,728
  129,508
  140,738
  152,426
  164,580
  177,214
  190,344
  203,988
  218,167
  232,907
  248,233
  264,176
  280,767
  298,040
  316,033
  334,784
  354,335
  374,730
  396,016
  418,242
Adjusted assets (=assets-cash), $m
  30,698
  36,247
  42,300
  48,869
  55,944
  63,513
  71,564
  80,086
  89,070
  98,508
  108,395
  118,728
  129,508
  140,738
  152,426
  164,580
  177,214
  190,344
  203,988
  218,167
  232,907
  248,233
  264,176
  280,767
  298,040
  316,033
  334,784
  354,335
  374,730
  396,016
  418,242
Revenue / Adjusted assets
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
  0.524
Average production assets, $m
  10,923
  12,896
  15,050
  17,387
  19,905
  22,598
  25,462
  28,494
  31,691
  35,049
  38,566
  42,243
  46,078
  50,074
  54,232
  58,557
  63,052
  67,724
  72,578
  77,623
  82,867
  88,320
  93,993
  99,896
  106,041
  112,443
  119,115
  126,071
  133,328
  140,901
  148,809
Working capital, $m
  0
  -3,115
  -3,635
  -4,200
  -4,808
  -5,458
  -6,150
  -6,882
  -7,654
  -8,465
  -9,315
  -10,203
  -11,129
  -12,094
  -13,099
  -14,143
  -15,229
  -16,357
  -17,530
  -18,748
  -20,015
  -21,332
  -22,702
  -24,128
  -25,612
  -27,159
  -28,770
  -30,450
  -32,203
  -34,032
  -35,942
Total debt, $m
  11,119
  12,560
  18,008
  23,920
  30,287
  37,099
  44,345
  52,016
  60,101
  68,595
  77,493
  86,793
  96,495
  106,602
  117,121
  128,060
  139,431
  151,247
  163,527
  176,289
  189,554
  203,348
  217,696
  232,628
  248,174
  264,367
  281,243
  298,839
  317,195
  336,353
  356,356
Total liabilities, $m
  31,181
  32,622
  38,070
  43,982
  50,349
  57,161
  64,407
  72,078
  80,163
  88,657
  97,555
  106,855
  116,557
  126,664
  137,183
  148,122
  159,493
  171,309
  183,589
  196,351
  209,616
  223,410
  237,758
  252,690
  268,236
  284,429
  301,305
  318,901
  337,257
  356,415
  376,418
Total equity, $m
  2,154
  3,625
  4,230
  4,887
  5,594
  6,351
  7,156
  8,009
  8,907
  9,851
  10,839
  11,873
  12,951
  14,074
  15,243
  16,458
  17,721
  19,034
  20,399
  21,817
  23,291
  24,823
  26,418
  28,077
  29,804
  31,603
  33,478
  35,433
  37,473
  39,602
  41,824
Total liabilities and equity, $m
  33,335
  36,247
  42,300
  48,869
  55,943
  63,512
  71,563
  80,087
  89,070
  98,508
  108,394
  118,728
  129,508
  140,738
  152,426
  164,580
  177,214
  190,343
  203,988
  218,168
  232,907
  248,233
  264,176
  280,767
  298,040
  316,032
  334,783
  354,334
  374,730
  396,017
  418,242
Debt-to-equity ratio
  5.162
  3.470
  4.260
  4.890
  5.410
  5.840
  6.200
  6.490
  6.750
  6.960
  7.150
  7.310
  7.450
  7.570
  7.680
  7.780
  7.870
  7.950
  8.020
  8.080
  8.140
  8.190
  8.240
  8.290
  8.330
  8.370
  8.400
  8.430
  8.460
  8.490
  8.520
Adjusted equity ratio
  -0.016
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,128
  -2,084
  -2,389
  -2,939
  -3,533
  -4,171
  -4,851
  -5,574
  -6,338
  -7,141
  -7,984
  -8,753
  -9,675
  -10,635
  -11,636
  -12,677
  -13,759
  -14,884
  -16,053
  -17,268
  -18,530
  -19,843
  -21,208
  -22,628
  -24,106
  -25,646
  -27,250
  -28,922
  -30,665
  -32,484
  -34,383
Depreciation, amort., depletion, $m
  1,033
  1,197
  1,378
  1,575
  1,786
  2,013
  2,253
  2,508
  2,777
  3,059
  3,354
  3,550
  3,872
  4,208
  4,557
  4,921
  5,298
  5,691
  6,099
  6,523
  6,964
  7,422
  7,899
  8,395
  8,911
  9,449
  10,010
  10,594
  11,204
  11,840
  12,505
Funds from operations, $m
  3,111
  -886
  -1,011
  -1,364
  -1,747
  -2,158
  -2,598
  -3,066
  -3,561
  -4,082
  -4,630
  -5,203
  -5,803
  -6,428
  -7,079
  -7,756
  -8,461
  -9,193
  -9,954
  -10,745
  -11,567
  -12,421
  -13,309
  -14,234
  -15,195
  -16,197
  -17,240
  -18,327
  -19,461
  -20,644
  -21,878
Change in working capital, $m
  1,558
  -475
  -520
  -565
  -608
  -650
  -692
  -732
  -772
  -811
  -850
  -888
  -926
  -965
  -1,004
  -1,044
  -1,086
  -1,128
  -1,173
  -1,219
  -1,267
  -1,317
  -1,370
  -1,426
  -1,484
  -1,546
  -1,611
  -1,680
  -1,753
  -1,829
  -1,910
Cash from operations, $m
  1,553
  -411
  -491
  -799
  -1,139
  -1,508
  -1,906
  -2,334
  -2,789
  -3,271
  -3,780
  -4,315
  -4,876
  -5,462
  -6,074
  -6,712
  -7,375
  -8,065
  -8,781
  -9,526
  -10,300
  -11,104
  -11,939
  -12,808
  -13,711
  -14,651
  -15,629
  -16,647
  -17,708
  -18,815
  -19,968
Maintenance CAPEX, $m
  0
  -918
  -1,084
  -1,265
  -1,461
  -1,673
  -1,899
  -2,140
  -2,394
  -2,663
  -2,945
  -3,241
  -3,550
  -3,872
  -4,208
  -4,557
  -4,921
  -5,298
  -5,691
  -6,099
  -6,523
  -6,964
  -7,422
  -7,899
  -8,395
  -8,911
  -9,449
  -10,010
  -10,594
  -11,204
  -11,840
New CAPEX, $m
  -826
  -1,974
  -2,154
  -2,337
  -2,517
  -2,693
  -2,865
  -3,032
  -3,196
  -3,358
  -3,518
  -3,676
  -3,835
  -3,996
  -4,158
  -4,324
  -4,495
  -4,671
  -4,854
  -5,045
  -5,244
  -5,453
  -5,672
  -5,903
  -6,146
  -6,402
  -6,672
  -6,956
  -7,257
  -7,573
  -7,908
Cash from investing activities, $m
  -1,854
  -2,892
  -3,238
  -3,602
  -3,978
  -4,366
  -4,764
  -5,172
  -5,590
  -6,021
  -6,463
  -6,917
  -7,385
  -7,868
  -8,366
  -8,881
  -9,416
  -9,969
  -10,545
  -11,144
  -11,767
  -12,417
  -13,094
  -13,802
  -14,541
  -15,313
  -16,121
  -16,966
  -17,851
  -18,777
  -19,748
Free cash flow, $m
  -301
  -3,303
  -3,728
  -4,401
  -5,117
  -5,873
  -6,670
  -7,505
  -8,380
  -9,292
  -10,243
  -11,233
  -12,261
  -13,330
  -14,441
  -15,593
  -16,791
  -18,035
  -19,327
  -20,670
  -22,067
  -23,521
  -25,034
  -26,609
  -28,251
  -29,963
  -31,749
  -33,613
  -35,559
  -37,592
  -39,717
Issuance/(repayment) of debt, $m
  -153
  1,441
  5,448
  5,912
  6,367
  6,812
  7,246
  7,670
  8,086
  8,494
  8,898
  9,300
  9,702
  10,107
  10,519
  10,939
  11,371
  11,817
  12,280
  12,762
  13,266
  13,794
  14,348
  14,932
  15,546
  16,193
  16,876
  17,596
  18,356
  19,157
  20,003
Issuance/(repurchase) of shares, $m
  0
  6,191
  2,995
  3,596
  4,240
  4,928
  5,657
  6,426
  7,236
  8,085
  8,973
  9,786
  10,753
  11,759
  12,805
  13,892
  15,022
  16,197
  17,417
  18,686
  20,004
  21,375
  22,802
  24,287
  25,834
  27,445
  29,125
  30,877
  32,705
  34,613
  36,606
Cash from financing (excl. dividends), $m  
  190
  7,632
  8,443
  9,508
  10,607
  11,740
  12,903
  14,096
  15,322
  16,579
  17,871
  19,086
  20,455
  21,866
  23,324
  24,831
  26,393
  28,014
  29,697
  31,448
  33,270
  35,169
  37,150
  39,219
  41,380
  43,638
  46,001
  48,473
  51,061
  53,770
  56,609
Total cash flow (excl. dividends), $m
  -142
  4,329
  4,714
  5,106
  5,491
  5,866
  6,233
  6,591
  6,942
  7,287
  7,628
  7,854
  8,193
  8,536
  8,883
  9,238
  9,602
  9,979
  10,370
  10,777
  11,203
  11,649
  12,117
  12,610
  13,128
  13,675
  14,252
  14,860
  15,501
  16,178
  16,892
Retained Cash Flow (-), $m
  1,833
  -6,191
  -2,995
  -3,596
  -4,240
  -4,928
  -5,657
  -6,426
  -7,236
  -8,085
  -8,973
  -9,786
  -10,753
  -11,759
  -12,805
  -13,892
  -15,022
  -16,197
  -17,417
  -18,686
  -20,004
  -21,375
  -22,802
  -24,287
  -25,834
  -27,445
  -29,125
  -30,877
  -32,705
  -34,613
  -36,606
Prev. year cash balance distribution, $m
 
  2,637
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  775
  1,720
  1,511
  1,250
  939
  576
  165
  -294
  -798
  -1,345
  -1,933
  -2,560
  -3,223
  -3,922
  -4,654
  -5,420
  -6,218
  -7,047
  -7,908
  -8,801
  -9,727
  -10,685
  -11,678
  -12,705
  -13,770
  -14,873
  -16,017
  -17,203
  -18,435
  -19,714
Discount rate, %
 
  11.30
  11.87
  12.46
  13.08
  13.74
  14.42
  15.14
  15.90
  16.70
  17.53
  18.41
  19.33
  20.29
  21.31
  22.37
  23.49
  24.67
  25.90
  27.19
  28.55
  29.98
  31.48
  33.06
  34.71
  36.44
  38.27
  40.18
  42.19
  44.30
  46.51
PV of cash for distribution, $m
 
  696
  1,374
  1,062
  765
  493
  257
  61
  -90
  -199
  -267
  -301
  -307
  -292
  -262
  -225
  -185
  -147
  -112
  -82
  -58
  -39
  -26
  -16
  -10
  -6
  -3
  -2
  -1
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  41.4
  34.1
  28.0
  23.0
  18.8
  15.3
  12.5
  10.2
  8.3
  6.8
  5.5
  4.5
  3.7
  3.0
  2.4
  2.0
  1.6
  1.3
  1.1
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.2
  0.1

Icahn Enterprises L.P. (Icahn Enterprises) is a holding company. The Company's segments include Automotive, Energy, Metals, Railcar, Gaming, Food Packaging, Mining, Real Estate and Home Fashion. The Company's Investment segment includes various private investment funds. The Company operates its Automotive segment through its ownership in Federal-Mogul Holdings Corporation and IEH Auto Parts Holding LLC. The Company operates Energy segment through its controlling interest in CVR Energy, Inc. It operates its Metals segment through its subsidiary, PSC Metals, Inc. The Company operates its Railcar segment through its ownership interests in American Railcar Industries, Inc. Its Food Packaging segment consists of ownership in Viskase Companies, Inc. The Company's Real Estate operations consist of rental real estate, property development and associated resorts. It also owns a limited partner interest in Icahn Enterprises Holdings L.P. (Icahn Enterprises Holdings).

FINANCIAL RATIOS  of  Icahn Enterprises (IEP)

Valuation Ratios
P/E Ratio -6.8
Price to Sales 0.5
Price to Book 3.6
Price to Tangible Book
Price to Cash Flow 4.9
Price to Free Cash Flow 10.5
Growth Rates
Sales Growth Rate 7.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -39.2%
Cap. Spend. - 3 Yr. Gr. Rate -6.6%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 516.2%
Total Debt to Equity 516.2%
Interest Coverage -2
Management Effectiveness
Return On Assets -1.3%
Ret/ On Assets - 3 Yr. Avg. -0.8%
Return On Total Capital -7.6%
Ret/ On T. Cap. - 3 Yr. Avg. -5.7%
Return On Equity -36.7%
Return On Equity - 3 Yr. Avg. -22.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 16.7%
Gross Margin - 3 Yr. Avg. 14.6%
EBITDA Margin -3%
EBITDA Margin - 3 Yr. Avg. -0.9%
Operating Margin -9.7%
Oper. Margin - 3 Yr. Avg. -6.5%
Pre-Tax Margin -13.6%
Pre-Tax Margin - 3 Yr. Avg. -10.2%
Net Profit Margin -7%
Net Profit Margin - 3 Yr. Avg. -5.7%
Effective Tax Rate -1.6%
Eff/ Tax Rate - 3 Yr. Avg. 3.8%
Payout Ratio -9.1%

IEP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the IEP stock intrinsic value calculation we used $16096 million for the last fiscal year's total revenue generated by Icahn Enterprises. The default revenue input number comes from 2016 income statement of Icahn Enterprises. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our IEP stock valuation model: a) initial revenue growth rate of 18% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 11.3%, whose default value for IEP is calculated based on our internal credit rating of Icahn Enterprises, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Icahn Enterprises.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of IEP stock the variable cost ratio is equal to 107.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for IEP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.6% for Icahn Enterprises.

Corporate tax rate of 27% is the nominal tax rate for Icahn Enterprises. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the IEP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for IEP are equal to 67.9%.

Life of production assets of 11.9 years is the average useful life of capital assets used in Icahn Enterprises operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for IEP is equal to -16.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2154 million for Icahn Enterprises - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 164.724 million for Icahn Enterprises is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Icahn Enterprises at the current share price and the inputted number of shares is $8.6 billion.

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COMPANY NEWS

▶ Carl Icahn Nominates 4 Directors to Xerox"s Board   [Dec-11-17 02:15PM  GuruFocus.com]
▶ Icahn Enterprises L.P. Announces Pricing of Senior Notes   [Dec-01-17 04:05PM  GlobeNewswire]
▶ Icahn takes shots at SandRidge board, calls poison pill a 'travesty'   [Nov-30-17 12:55PM  American City Business Journals]
▶ Even Lady Gaga can't save Tiffany from the 'Amazon effect'   [Nov-29-17 11:18AM  Yahoo Finance Video]
▶ Carl Icahn Takes Stake in SandRidge Energy   [Nov-27-17 12:32PM  GuruFocus.com]
▶ Carl Icahn becomes largest shareholder in oil-and-gas producer SandRidge   [Nov-22-17 06:02PM  American City Business Journals]
▶ Icahn Capital Trims Major AIG Position   [Nov-14-17 04:57PM  Barrons.com]
▶ It might be time to sell Home Depot   [10:41AM  Yahoo Finance Video]
▶ You Should Diversify With These Industrial Dividend Stocks   [Nov-11-17 11:02AM  Simply Wall St.]
▶ [$$] Icahn Faces Questions Over Trump Advisory Role   [08:26PM  The Wall Street Journal]
▶ 3 Overlooked High-Dividend Stocks   [01:00PM  InvestorPlace]
▶ Icahn Enterprises posts 3Q profit   [08:29AM  Associated Press]
▶ Icahn Enterprises Rises 5% in 30-Day Period on Acquisitions   [Oct-10-17 01:41PM  GuruFocus.com]
▶ Why Advance Auto Parts, Inc. (AAP) Stock Is Falling Today   [Oct-04-17 03:17PM  InvestorPlace]
▶ [$$] Transom Sells American Driveline Systems to Icahn Enterprises   [Oct-02-17 04:35PM  The Wall Street Journal]
▶ 3 High-Yield Billionaire Stocks   [Sep-06-17 05:30AM  Motley Fool]
▶ See which Arizona auto company Carl Icahn has just acquired   [Aug-31-17 06:10PM  American City Business Journals]
▶ 3 Stocks That Could Make or Break Carl Icahn's Portfolio   [Aug-26-17 09:34AM  Motley Fool]
▶ Here's Why Herbalife (HLF) Stock Jumped Today   [Aug-21-17 12:55PM  Zacks]
▶ 3 Stocks Carl Icahn Is Buying and Selling   [08:15AM  Motley Fool]
▶ Icahn Enterprises posts 2Q profit   [12:01AM  Associated Press]
▶ Icahn Enterprises L.P. Announces Quarterly Distribution   [Aug-03-17 04:01PM  GlobeNewswire]
▶ Icahn may buy thousands of auto-repair shops   [Jun-05-17 04:47PM  CNBC Videos]
▶ [$$] Carl Icahn Ups His Bet by Buying Precision Auto Care   [Jun-02-17 10:53PM  The Wall Street Journal]
▶ [$$] Carl Icahn Ups His Bet by Buying Precision Auto Care   [08:04PM  The Wall Street Journal]
▶ Icahn Guides Trumps Policy and Scores $60 Million   [May-24-17 06:00AM  Bloomberg]
▶ [$$] Carl Icahns Charity Supports EducationIt Also Lent Him $119 Million   [May-19-17 10:56PM  The Wall Street Journal]
▶ Stocks Billionaire Carl Icahn Is Buying Now   [May-18-17 11:40AM  Motley Fool]
▶ Here's What Carl Icahn Bought and Sold in the First Quarter   [May-16-17 11:44AM  TheStreet.com]
Financial statements of IEP
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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