• Economy
  • Editor’s Pick
Money Rise Today – Investing and Stock News
  • Investing
  • Stock
Investing

Rolls-Royce share price analysis: buy, sell or hold?

by August 12, 2024
written by August 12, 2024

Rolls-Royce (LON: RR) share price has held steady this year, making it one of the best-performing companies in the FTSE 100 index. It has risen by over 64% this year, giving it a market cap of over £41 billion. 

Rolls-Royce is doing well

Rolls Royce, one of the leading industrial companies in the world, is doing well, helped by the rising demand across its three key divisions and great execution. 

It confirmed this view recently when it published its financial results for the first half of the year. The numbers showed that its underlying revenue rose to £8.18 billion this year, higher than the £6.95 billion it made a year earlier. 

Its operating profit nearly doubled as it moved from £673 million to over £1.14 billion while its profit before taxation soared to over £1.03 billion. Most importantly, Rolls-Royce generated a free cash flow of over £1.15 billion. 

These results demonstrated that the management was executing well at a time when supply chain constraints are continuing. Most of its improvement came from its civil aviation business, where the company sells engines and then takes Long Term Service Agreements (LTSA). 

When everything is going on well, the LTSA strategy is highly profitable since its airline customers pay for every flight hour, a process that spreads costs, making it more affordable to them. It is Rolls-Royce’s biggest cash earner.

Rolls-Royce is also growing its margins across all its divisions. Its civil aviation’s operating margins rose to 18% while the defense and power systems rose to 15.5% and 10.3%, respectively. If this trend continues, it means that the company is set to hit its mid-term targets ahead of schedule. 

Meanwhile, Roll-Royce Holdings is also benefiting from the data center business as the artificial intelligence craze continues. Its power business had over $1.8 billion in revenues and an operating profit of over £189 million. 

Most importantly, Rolls-Royce has improved its balance sheet. It ended the last quarter with over £6.8 billion in available liquidity, with its cash and equivalents standing at £4.3 billion. It has also reduced its net debt to over £0.8 billion, down from the pandemic high of £5.2 billion.

Additionally, Rolls-Royce investors will now benefit from the stock appreciation and a dividend, which will be between 30% and 40% of its underlying profit. 

Rolls-Royce valuation and catalysts

The main concern among investors is whether Rolls-Royce is overvalued or undervalued. Recent data shows that the company has a market cap of over £41 billion or $52 billion, making it the 16th biggest company in the UK. 

This valuation makes it significantly smaller than General Electric Aerospace, the biggest jet engine manufacturer in the world, which has a valuation of over $179 billion. GE Aerospace made over $9.1 billion in revenues in the last quarter. 

In terms of multiples, data shows that Rolls-Royce Holdings trades at a price-to-earnings ratio of 17, which is lower than the S&P 500 average of 21 and the FTSE 100 index average of 19. This means that the company is still at a discount since its revenue growth rate is better than that of the S&P 500 and FTSE 100. 

Rolls-Royce is also trading at a discount than most of its industrial rivals. GE Aviation has a price-to-earnings multiple of 45 while companies like Howmet Aerospace (HWM), Safran, and RTX have multiples of over 40. These multiples mean that the company is trading at a discount.

Other metrics show that the company is undervalued. A discounted free cash flow (DCF) valuation shows that the company is relatively cheap. According to Simply Wall St, the company was trading at a 54% discount to its fair value. 

Therefore, fundamentally, the company seems like it is undervalued. Besides, it is growing, its business is seeing strong demand, and is now a leaner company than what it was during the Covid-19 pandemic. It has also received upgrades from the three leading rating agencies like Moody’s, Fitch, and S&P Global.

However, the management will need to execute well to justify the current valuation. This means that they need to ensure the quality of its engines to prevent the maintenance woes it had a few years ago.

Rolls-Royce share price forecast

The daily chart shows that the RR stock price has been in a strong bull run this year and recently soared to a record high of 502p. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA). 

The Relative Strength Index (RSI) and the Stochastic Oscillator have continued rising, meaning that it has strong momentum. The stock has formed what looks like a double-top pattern. 

Therefore, the stock needs to move above that resistance at 502p to confirm the bullish trend. If this happens, the next point to watch will be at 600p.

The post Rolls-Royce share price analysis: buy, sell or hold? appeared first on Invezz

0 comment
0
FacebookTwitterPinterestEmail

previous post
Silver gains 1.6% as geopolitical tensions intensify over Ukraine-Russia conflict
next post
Is Perplexity AI really a threat to Google Search?

related articles

Asian markets close: Nikkei, Kospi down; Sensex closes...

May 19, 2025

Qualcomm unveils AI chips for data centres with...

May 19, 2025

Best crypto to buy now: Bitcoin Pepe leads...

May 19, 2025

JPMorgan cuts Netflix rating, citing balanced risk-reward post-rally;...

May 19, 2025

Bitcoin ETF open interest dips 5% to $29.47B...

May 19, 2025

US stocks slip in the red on Monday:...

May 19, 2025

Should Klarna IPO remain on watch list after...

May 19, 2025

Why this brokerage downgraded UnitedHealth’s rating to ‘hold’

May 19, 2025

Nvidia opens NVLink Fusion ecosystem, expands Taiwan footprint...

May 19, 2025

Cathie Wood says Trump’s tariffs could unlock tech...

May 19, 2025
Enter Your Information Below To Receive Free Trading Ideas, Latest News, And Articles.


Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest News

  • Trump’s Tariffs: Canada, Mexico Pause, China Levies Continue

    February 4, 2025
  • Trump defends Qatar jumbo jet offer as troubled Boeing fails to deliver new Air Force One fleet

    May 12, 2025
  • Taco Bell to roll out AI drive-thru ordering in hundreds of locations by end of year

    August 1, 2024
  • Long BDX: bullish reversal from $220 support amid improving fundamentals and potential upside breakout signals

    December 4, 2024
  • Republicans look to stop China’s ‘backdoor’ tariff dodging scheme

    May 22, 2025

Popular Posts

  • 1

    Secret Service admits leaning on ‘state and local partners’ after claim it ignored Trump team’s past requests

    July 21, 2024
  • 2

    Elon and Vivek should tackle US funding for this boondoogle organization and score a multimillion dollar win

    December 4, 2024
  • 3

    Forex Profit Calculator: Maximize Your Trading Potential

    July 10, 2024
  • 4

    Five more House Democrats call on Biden to drop out, third US senator

    July 19, 2024
  • 5

    Biden calls to ‘lower the temperature’ then bashes Trump in NAACP speech

    July 17, 2024

Categories

  • Economy (829)
  • Editor's Pick (4,728)
  • Investing (624)
  • Stock (774)

Latest Posts

  • Retired judges criticize Trump admin over arrest of Milwaukee County judge: ‘Embarrassing spectacle’

    May 8, 2025
  • Supreme Court likely to side with parents in letting them opt out of LGBTQ storybooks, expert says

    April 23, 2025
  • S&P 500, Nasdaq slip as NVIDIA underperforms; Tesla shares and crypto stocks jump

    March 3, 2025

Recent Posts

  • House Dems organize rapid response task force and litigation group to combat Trump agenda

    February 11, 2025
  • Where are low-cost airlines cutting back now? New planes.

    September 2, 2024
  • How Vuori reached a $5.5 billion valuation by taking share from Lululemon

    December 19, 2024

Editor’s Pick

  • Boeing ‘disappointed’ customers but is on the path to ‘transformational change,’ CEO says

    July 23, 2024
  • Labor groups begin to unite behind Harris’ campaign — but some holdouts remain

    July 24, 2024
  • Trump nominees debut new science journal aimed at spurring scientific discourse, increasing transparency

    February 11, 2025
  • About us
  • Contacts
  • Privacy Policy
  • Terms & Conditions

Disclaimer: moneyrisetoday.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2025 moneyrisetoday.com | All Rights Reserved

Money Rise Today – Investing and Stock News
  • Economy
  • Editor’s Pick
Money Rise Today – Investing and Stock News
  • Investing
  • Stock