Rolls-Royce Holdings (LSE: RR.) shares show some storming growth over the past year.
But then, the company pulled itself round a lot quicker and more impressively than I’d thought it could.
So, I think the share price climb is justified. And I take my hat off to those with a clearer vision, who bought back when I was still too timid to plonk down any cash.
But after nearly trebling over the past 12 months, is there room left for more? And will Rolls be up there when the FTSE 100 next surges?
But, hang on a moment. Who says the Footsie is set to surge anyway?
Well, the index is still down 33% in the past five years. And forecasts show big growth in earnings and dividends in the next few years.
Analysts even think the banks, probably the most unloved sector right now, could break their record for dividend cash set in 2007. And that was before the banking crisis.
Rolls-Royce shares at £6?
Whether the FTSE 100 surges or not, why might Rolls-Royce shares climb further?
The City’s tipsters do seem to be bullish. UBS, perhaps its biggest fan, recently upgraded its share price target to 350p, from its earlier 200p.
The shares are already above 200p. But to reach 350p, they’d have to gain another 60%.
And that’s not the end of the UBS bullishness. The bank’s modelling puts the possible upside as high as 600p. The worst downside, though, suggests a fall to 100p.
So, I might not place any bets on Rolls shares reaching £6 any time soon.
Beware the analysts
I’d caution against putting too much trust in analysts. They often get on a trend after the trend has started. And trends can be, and often are, derailed.
Engine flying hours are improving, and that’s a trend that looks set to continue. But what global political events might hold it back? The 2023 G20 summit doesn’t look like being one of peace and harmony.
Still, there is a buy consensus out there. And that’s something I’ll consider, cautiously, when I make my decisions.
There’s little Rolls-Royce can do about external influences. But it can focus on its cash flow and debt.
And the board has done way better so far on that front than I would have thought a couple of years ago.
The Rolls-Royce share price future will, surely, be down to long-term company performance and stock valuation. And the outlook there seems upbeat.
Forecasts suggest growing earnings and a falling price-to-earnings (P/E) ratio. And, more important to me, analysts have big rises in cash flow marked on their cards.
Still time to buy?
So, will I buy in the hope of a further surge? Well, I fear the biggest risk is that the optimism might already be built into today’s share price. And the slightest slip could send the shares down again.
So I’ll keep watching. And maybe I’ll come back some day and again congratulate those who judge it better than me.