If I’d invested £1,000 in Rolls-Royce shares 3 years ago, here’s how much I’d have now!

Rolls-Royce shares have plummeted over the past three years. Our writer explores the return he’d have made from an investment at the end of 2019.

| 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.

Middle-aged white man pulling an aggrieved face while looking at a screen

Image source: Getty Images

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 (LSE: RR.) shares were among the pandemic’s biggest losers. As international travel came to a standstill, demand for the FTSE 100 aerospace manufacturer’s products evaporated and the share price tumbled.

Thankfully, I didn’t buy the company’s shares, but if I had here’s how my position would look today.

Pandemic woes

If I’d invested £1,000 in December 2019, I’d have paid £2.34 per share. So I’d have scooped up 427 shares with 82p left as spare change.

That might have seemed reasonable considering the Rolls-Royce share price was above £2 for nearly 10 years prior to that, bar a handful of occasions. Indeed, for a brief period the company’s shares were trading above £4.

However, that was before Covid-19 wreaked havoc on Rolls-Royce’s business. In March 2020, the share price fell off a cliff and it’s never truly recovered. At the time of writing, the company’s mired in penny stock territory, trading at 91p per share.

This means my initial investment would have shrunk to £388.57 today. To add to the misery, the last ex-dividend date was in October 2019, so I’d have no dividend income during the past three years to mitigate hefty losses.

Signs of a recovery

I’ve been bearish on Rolls-Royce shares this year, but I can see a strengthening case that they’re undervalued.

A return to the skies could lift the stock higher in 2023. In its most recent trading update the company revealed large-engine flying hours are at 65% of pre-pandemic levels. This is encouraging, but the trend will need to continue for the share price to stage a sustained recovery.

In addition, there are promising developments from a partnership with easyJet. In a landmark achievement with the FTSE 250 airline, Rolls-Royce confirmed last month that it conducted the world’s first run of a modern aero engine on hydrogen.

If the business can remain at the forefront of developing ground-breaking technologies for greener air travel, I think the long-term prospects for the stock are good.

Source: Rolls-Royce infographic

Other aspects of Rolls-Royce’s business also give me reasons to be optimistic. With government backing, plans to build small modular nuclear reactors across the UK could prove a useful revenue source in years to come. The defence arm should continue to perform well too with the ongoing war in Ukraine acting as a tailwind.

However, the company is still grappling with a £4bn debt burden that it accrued in order to survive the turbulent years. This could continue to weigh on the share price, in my view.

Admittedly, Rolls-Royce has time to bring this under control, given most of its debt matures between 2026 and 2028. Nonetheless, if the UK economy enters a recession next year, it won’t be an easy environment for the business to get its finances into shape.

Should I buy the shares?

I think it’s unlikely the next three years will be as bad for Rolls-Royce shares as the last three have been. Despite some lingering concerns, I’m eyeing up the company for my portfolio for the first time.

I plan to rebalance my portfolio in the New Year. If I have some spare cash, I’ll buy some Rolls-Royce shares if they’re still trading below £1.

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.

Charlie Carman 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.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »