If I’d bought Rolls-Royce shares the day Tufan Erginbilgiç joined here’s what I’d have now

Harvey Jones is startled by just how fast the Rolls-Royce share price has risen since its transformative CEO took over. Can it really continue?

| 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.

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.

If Tufan Erginbilgiç could do for the England football team what he’s done for the Rolls-Royce (LSE: RR) share price, we’d win the Euros at a canter.

The turnaround since he was appointed CEO on 1 January 2023 –  less than 18 months ago – is nothing short of astonishing. Rolls-Royce shares closed at the end of December 2022 at 93.2p. Today, I’d have to pay 475p to buy them. That’s a staggering 415% return. It would have turned a £10,000 investment into £51,462.

Admittedly, it’s not quite as good as chipmaker Nvidia. Its shares have rocketed 795% over the same period, turning £10k into £89,500. It’s still pretty fine, though. The big question is: can Erginbilgiç keep it going?

FTSE 100 recovery star

Everything I’ve read about the man suggests he has the grit and will to do so. When he took over, Rolls-Royce had lost 75% of its share value, after being hit by one problem after another. Today, it’s no longer a burning platform, but a booming one.

However, the Rolls-Royce share price and Erginbilgiç’s reputation aren’t the only things riding high today. So are investor expectations, and the company’s valuation. The shares trade now at 35.3 times trailing earnings. That is getting on towards three times the FTSE 100 average of 12.7 times.

Yet the share price continues to climb, up another 11.15% in the last month. Over one year, it’s soared 209.24%. The rate of ascent is slowing, but broker Citi has just lifted its target price to 555p. That’s up 17% from today.

It reckons “positive sentiment” will continue to drive the rerating, which is one of the things that worries me. Sentiment is positively giddy. The mildest earnings miss could bring it back to reality with a bump.

Yes, Citi says the wide-body engine aircraft engine demand and hopes of a reinstated dividend justify its new target price. No doubt we will all be watching like hawks when Rolls-Royce delivers its first-half results on 1 August.

I can’t buy it today

The outlook seems bright, with 2023 sales of £16.49bn forecast to hit £16.82bn in 2024 and £18.2bn in 2025.

The spectre of debt hung over Rolls-Royce for years. Yet it fell from £3.3bn in 2022 to £2bn in 2023, and is forecast to collapse to just £270m in 2024. In 2025, the group will boast a net cash position of £1.9bn.

Investors have totally bought into Erginbilgiç. Yet as his early shock doctrine wears off, growing the business could get harder. Being a boss only gets harder. Just ask Gareth Southgate.

We’ll know more when next month’s results are in. I can’t see a major bounce – just how much good news can one company deliver?

We are reaching peak Rolls-Royce and peak Erginbilgiç, too. I’m looking elsewhere for the next big FTSE 100 turnaround play. Sadly, it probably won’t be nearly as massive as this one.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Nvidia and Rolls-Royce Plc. 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

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »