Rolls-Royce Holding PLC Could Help You Retire Early

Retirement may not be so long away for shareholders in Rolls-Royce Holding PLC (LOB: RR). Here’s why…

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Rolls-Royce

Although 2014 has not seen Rolls Royce (LSE: RR) (NASDAQOTH: RYCEY.US) make the best of starts — its shares are down 7.7% while the FTSE 100 is down only 2.6% — it has enjoyed far superior performance over the last few years.

Indeed, Rolls Royce has outperformed the FTSE 100 over one year (up 20% versus the FTSE 100’s 5%) and over five years (up 250% versus 53% for the FTSE 100).

Should you invest £1,000 in Legal & General right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General made the list?

See the 6 stocks

One reason behind this outperformance could be the consistency of earnings growth that has been delivered by Rolls Royce. For instance, over the last 5 years its growth in earnings per share (EPS) has averaged over 12% per annum, with positive growth being delivered in four of those five years. The only negative year was 2010, when EPS fell by 2%.

Therefore, it seems as though investors view Rolls Royce as something of a consistent and reliable growth stock that tends to deliver.

Indeed, the next two years also appear to offer above-average growth rates. EPS is set to grow by 8% in each of the next two years and, although this is less than the rate at which it has been growing over the last 5 years (as mentioned), it is still above the average growth rate that the wider market is predicted to achieve (between 4-7%) over the next two years.

Furthermore, the fall in share price at the start of 2014 could give longer term investors (ie, those with an eye on building a retirement fund) an opportunity to buy Rolls Royce shares when they represent relatively good value for money.

For instance, Rolls Royce currently trades on a forward price to earnings (P/E) ratio of 16.4. When compared to the FTSE 100’s P/E of 13.5, this may seem high. However, when it is compared to the wider ‘Industrials’ group (to which Rolls Royce belongs), it seems much better value, since the ‘Industrials’ group currently trades on a P/E ratio of 24.

This puts Rolls Royce on a discount of 32% versus its industry group. When this is combined with the above-average growth rate forecasts and historic consistency of earnings growth, it means that Rolls Royce could help you retire early.

But there may be an even bigger investment opportunity that’s caught my eye:

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter does not own shares in Rolls Royce.

More on Investing Articles

Investing Articles

Can the Rolls-Royce share price hit £13 in the coming year?

After a stunning couple of years for the Rolls-Royce share price, can it keep up its recent momentum? This writer…

Read more »

Calendar showing the date of 5th April on desk in a house
Investing Articles

Here’s how a £20k ISA could produce £1,580 of passive income in the next year

A Stocks and Shares ISA stuffed with dividend shares can be a lucrative source of passive income. Christopher Ruane explains…

Read more »

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »