The Motley Fool

The Rolls-Royce share price is up 65% in 3 months. Too late to buy?

A Rolls-Royce employee works on an engine
Image: Rolls-Royce

Like the famous engineer’s own jet engines, the Rolls-Royce (LSE: RR) share price has shown serious strength lately. But after rising so strongly in recent months, has this ‘fallen angel’ stock gone too far, too soon? And with RR shares trading close to their 2021 high, is it too late for me to jump aboard?

The Rolls-Royce share price collapses

If I needed a poster boy for the damage caused to the economy by Covid-19, I could easily opt for Rolls-Royce. In fact, this stock has had such a tough time that RR could also stand for ‘Roller-coaster Ride’. Over three years ago, the Rolls-Royce share price was flying high. On 3 August 2018, shares in the aerospace and defence company closed at 375.43p, close to a five-year high. However, the stock then went into decline, closing out 2019 at 234.45p after falling almost two-fifths (-37.6%) in 17 months. Alas, thanks to the coronavirus, the worst was yet to come.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

As Covid-19 infections spread worldwide, governments closed their borders and imposed lockdowns. As a result, the Rolls-Royce share price imploded in 2020. Almost unbelievably, RR stock crashed to a lifetime low of just 34.59p on 2 October 2020. At this point, this FTSE 100 champion’s shares had collapsed by almost six-sevenths (-85.2%) in 2020. But this brutal beatdown finally came to an end as RR stock roared back to life.

It’s been a great 12 months for RR

As I write, the Rolls-Royce share price stands at 142.1p, more than four times its 2020 low (+310.8%). Also, RR is up 88.2% over the past year and ahead 35.2% over six months. Remarkably, since closing at 87p on Monday, 19 July, the stock has soared by almost two-thirds (+63.4%) over three months. Over one month, it’s leapt by almost a quarter (+23%). Right now, RR could stand for ‘Rocket Ride’.

However, since hitting its 2021 intra-day high of 148.45p on Monday, 27 September, the Rolls-Royce share price has taken a breather. Today, it’s 6.35p (-4.3%) off this recent high. So, is it too late to get on board, or could there be more gains to come?

A long road to recovery?

Momentum investors who boarded the RR bandwagon in July are sitting pretty today. But, as a veteran value investor, I suspect that the Rolls-Royce share price may have risen too far, too fast recently. The problem with momentum trading is that when euphoria wears off, valuations can look very punchy indeed. Today, RR is valued at £11.9bn, but the group also has up to £4bn of net debt weighing it down. Then again, the firm is bolstering its balance sheet with sales, as well as winning new contracts.

The main issue for me is that, having survived a threat to its very existence, Rolls-Royce is a weaker company today than it was pre-Covid-19. I don’t own RR shares, but would I buy at the current Rolls-Royce share price? For me, the answer has to be a firm no. I’m bearish on the stock for now — until I see the next set of results, at least. I could easily be wrong. If air passenger miles skyrocket, so too would RR’s service revenues and cash flow. And if we get the coronavirus under control, air travel could boom once again. These positive outcomes could both be great news for long-suffering Rolls-Royce shareholders!

Our #1 North American Stock For The ‘New-Age Space Race’

Billionaires like Jeff Bezos, Bill Gates, Elon Musk, and Mark Zuckerberg are already betting big money on the ‘new-age space race’, and for one very good reason…

…because this is an industry that according to Morgan Stanley could be worth $1 TRILLION by 2040.

But the problem is most of their investments are in private companies — meaning they’re largely off-limits for everyday investors.

Fortunately, our team of analysts have identified one little-known company that’s at the cutting-edge of the space industry, and is currently trading at what looks like a VERY reasonable valuation

for now.

That’s why I want to urge you to check out our premium research on this top North American space stock ASAP.

Simply click here to see find out how you can grab your copy today

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.