As the Rolls-Royce share price climbs 11% this month, have I missed my chance?

The Rolls-Royce share price has been climbing steadily all year, but is there more growth to come, or has this Fool missed the flight?

| 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: Rolls-Royce plc

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.

The Rolls-Royce (LSE:RR.) share price feels like the ‘Talk of the Town’ these days. In the last year alone, the shares have soared a whopping 147%. This company’s been on my watchlist for a long time, but I keep on waiting for the right moment to pull the trigger.

So is there a buying opportunity on the horizon, or is this one just going to keep climbing higher?

An incredible recovery

The company’s turnaround story’s been nothing short of remarkable. Many investors will remember it facing severe challenges during the pandemic due to its reliance on the aviation sector. However, since then, management’s staged a dramatic recovery under CEO Tufan Erginbilgiç’s leadership.

Should you invest £1,000 in Boohoo Group right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Boohoo Group made the list?

See the 6 stocks

Cost-cutting measures, strategic refocusing, and a rebound in air travel have all contributed to the company’s improved fortunes. In the last month alone, the shares are up 11%.

Created with Highcharts 11.4.3Rolls-Royce Plc PriceZoom1M3M6MYTD1Y5Y10YALL1 Aug 201931 Aug 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

As an interested investor, I keep asking myself if this is the end of the recovery, or just getting started? Clearly, there’s a tremendous demand for the company’s products across, aviation, defence, and beyond.

Recent excitement’s been driven by the potential revenues in clean energy. Analysts point to the enormous opportunities for increased energy resilience through small modular reactors (SMRs) and sustainable aviation fuel. However, after a sustained rally, there’s a risk that investors take profits and move on at the first sign of trouble.

The numbers

To me, the answer to whether I’ve missed the boat sits in the numbers. With analysts looking far into the future for potential areas of growth, and mapping out risks, there are plenty of opinions out there. I try to focus on metrics like discounted cash flow (DCF) calculations. This estimate suggests there’s still a healthy 57% more growth before the determination of fair value’s reached.

Obviously, this sounds great. However, with annual earnings expected to decline by 1.6% for the next five years, growth may be flattening out. If investors have enjoyed healthy returns of late, a sudden change in trend might send a few packing.

Let’s take a look at the competition. Both BAE Systems and Babcock International have more appealing earnings growth (7.4% and 15.2%). At a P/E of 18 times (compared to 22 times and 16 times), the Rolls-Royce share price isn’t exactly expensive, but there could be better opportunities.

In the past, my key concern was the enormous £5.7bn debt on the balance sheet. However, recent earnings reports show the company’s substantially increasing earnings guidance for the coming year. I suspect the debt load will be heavily reduced by this time next year.

I’ll keep waiting

So while the easy money may have already been made, there could still be a good amount of potential for long-term investors. Ultimately, whether I’ve missed my chance with Rolls-Royce depends on the investment horizon I’m willing to commit to, and the success of the company’s long-term strategy.

I still see a lot of value in the company’s strategic positioning and growth potential. Although there may be plenty of opportunities out there, I’ll be keeping this one on my watchlist, and waiting for the right moment to buy.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

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. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

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. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

Gordon Best has no position in any of the shares mentioned. The Motley Fool UK has recommended 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

Number three written on white chat bubble on blue background
Investing Articles

Just released: the 3 best growth-focused stocks to consider buying in April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

£10,000 invested in Watches of Switzerland shares 1 year ago is now worth…

Watches of Switzerland shares have been decimated by Trump’s tariffs on Switzerland. Dr James Fox explores whether this is an…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

Growth stocks are crashing! Here’s what I’m doing now

Our writer shares his thoughts as growth stocks get crushed, as well as a favourite from the Nasdaq that he…

Read more »

Investing Articles

What’s going on with the Nvidia share price now?

The Nvidia share price is tanking. Once the most valuable listed company, Nvidia has seen more than $1trn wiped off…

Read more »

Investing Articles

This FTSE AIM stock has £2.3bn in net cash, and a market cap of £2.4bn!

I love this FTSE AIM stock, but it really hasn’t delivered for me yet. The stock trades with crazily low…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Down 15% in a week! Are these 5 FTSE 100 fallers screaming buys as markets plunge?

Five of Harvey Jones's favourite FTSE 100 stocks all have the same thing in common – they've fallen around 15%…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

2 stocks that have been crushed and now offer a ton of value

Edward Sheldon has been scanning the market for stocks that offer value after the sell-off. Here are two shares he…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

£10,000 invested in Aston Martin shares at Christmas is now worth…

Aston Martin shares have fallen from above £10 in early 2020 to pennies today. Is this the perfect time for…

Read more »