Up over 100% in 6 months, is now the time to buy Rolls-Royce shares?

Rolls-Royce shares have more than doubled in the space of half a year. Have I already missed the boat or could there be more gains ahead?

| 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.

Aerial shot showing an aircraft shadow flying over an idyllic beach

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.

It can be a tad frustrating when a stock I’ve been watching goes up a lot in a short space of time. That’s basically what’s happened with Rolls-Royce (LSE: RR) shares.

I’ve witnessed them more than double over the last 26 weeks while I’ve sat on my hands. When I had less grey hair than today, I might have bought the rising stock for fear of missing out (FOMO).

But over time I learned to stop doing that, as Mr Market has a nasty habit of turning up to offer me a stock for less than I’d already paid for it. Sometimes patience really can be a virtue.

Anyway, I see that the Rolls-Royce share price has levelled off in the last month. So is now a good time for me to invest?

The turnaround continues

In late February, the engine maker reported its full-year results for 2022. And there were plenty of reasons for optimism.

Its revenue grew to £13.5bn, up from £11.2bn in 2021. Meanwhile, it recorded £652m in underlying profit, which was £238m higher than the previous year.  

Importantly, a recovery in engine flying hours helped increase its free cash flow to £505m. That was up by a massive £2bn over 2021. While this is still not enough to put a major dent in its £3.3bn net debt, which remains a concern, it’s a very encouraging sign.

Its Civil Aerospace division remains its largest. So the restarting of travel in and out of China is a huge deal for the company. Its engines power 60% of China’s widebody planes and 90% of the country’s Airbus A330 fleet.

Today, the middle class in China numbers over 400m people. And the country is expected to overtake the US as the world’s largest passenger aviation market by 2030. So the long-term demand for the company’s engines looks likely to increase substantially.


One of the things I value in a business is optionality. That is, a company’s ability to identify and capitalise on new growth areas. This gives it multiple ways to grow and, I believe, a greater chance of succeeding over the long term.

For me, Rolls-Royce has abundant optionality.

Its Power Systems segment continues to grow. And its Defence division just announced a deal to provide reactors for Australia’s new fleet of nuclear-powered (though not nuclear-armed) submarines. This is part of a massive defence agreement between Australia, the UK, and the US.

Plus, the firm just secured funding to build a small nuclear reactor for a planned permanent human base on the Moon.

I think the company has many ways to win.

Will I buy the stock?

I’ve become increasingly bullish on Rolls. In fact, I think we could be in the foothills of a massive multi-year turnaround in the share price.

Of course, that’s assuming the company continues to make good progress, particularly in reducing its debt pile. But I see no reason why it shouldn’t given the reopening of China’s borders and a renewed focus on operational efficiency.

Furthermore, the stock is still 62% lower than it was a decade ago, despite its recent rise.

I’ve seen enough progress to warrant moving the shares from my watchlist to my buy list.

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.

Ben McPoland 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

The tax-free route to millionaire portfolios

• Although annual ISA subscriptions are capped, ISAs are an undoubtedly serious wealth-building tool: you can build serious wealth.

Read more »

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

Will FTSE 100 shares soar 35% after the general election?

Royston Wild explains why FTSE 100 shares might be about to soar, and discusses a top penny stock that could…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

After gaining 34% in a month, is the Nvidia share price now uninvestable?

Our author says the Nvidia share price is very high at the moment. He's cautious when considering investing in the…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

This under-the-radar FTSE 100 share has hiked dividends 13.7% a year for a decade. Time to buy?

Harvey Jones is kicking himself for missing out on this FTSE 100 share that's kept investors happy with long-term share…

Read more »

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

Labour winning the general election would be positive for UK stocks, says JP Morgan

One mega-bank thinks certain UK stocks could benefit following the 4 July election. This writer considers a FTSE share that…

Read more »

Older couple walking in park
Investing Articles

No savings at 40? Here’s how I’d aim to retire comfortably with FTSE 100 stocks

It's never too late to begin investing in FTSE 100 stocks for retirement. Royston Wild reveals three steps to help…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Down 17%, is National Grid’s share price a FTSE 100 bargain?

National Grid's share price has taken a battering following a multi-billion-pound rights issue and dividend rebasement. Is it now too…

Read more »

Environmental technology concept
Investing Articles

Up 150% this year! Can NVIDIA stock keep on soaring?

Christopher Ruane explains why NVIDIA stock has soared over 150% already this year, where it might be going -- and…

Read more »