The Motley Fool

Why I think the Rolls-Royce share price crash could be an opportunity to make a million

Having fallen by 20% in less than six months, the Rolls-Royce (LSE: RR) share price could offer recovery potential. The company has faced an uncertain period regarding the world economy which may persist during the course of 2019. However, it appears to be putting in place a sound strategy, while its valuation suggests that a margin of safety is now on offer.

As such, now could be the right time to buy it. However, not all falling shares could offer the same recovery appeal, with a profit warning sending one stock down as much as 30% on Tuesday.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Challenging outlook

The company in question is veterinary services group CVS (LSE: CVSG). It released a profit warning, with higher staff costs and challenging performance being recorded in its recently-acquired practices in The Netherlands. As a result, the company expects to announce EBITDA (earnings before interest, tax, depreciation and amortisation) for the first half of the year that are flat compared to the same period of the previous year.

The company has identified a number of cost-saving opportunities which are expected to have a positive impact on its efficiency over the medium term. It is also re-evaluating the prices it is willing to pay for potential acquisitions.

Clearly, CVS is experiencing challenging trading conditions. Investor sentiment appears to have declined significantly following its profit warning. As such, it may be prudent for investors to hold off purchasing its shares, and instead wait for positive news to emerge regarding the impact of the plans that it is set to put in place over the medium term.

Recovery potential

The decline in the Rolls-Royce share price could be reversed over the medium term. The company is putting in place a revised strategy that could lead to it being more efficient and capable of adapting to the change which is almost inevitable across the defence and civil aerospace sector. Investment in new products is likely to expand its global reach, and this could boost its financial performance over the coming years.

With the stock now having a price-to-earnings growth (PEG) ratio of just 0.3, it could offer a wide margin of safety. Certainly, a number of other industrial shares also trade on low valuations, but the diverse nature of the company’s business may make it more appealing over the long term. That’s especially the as since there is expected to be strong growth in a number of its key markets.

While Rolls-Royce’s shares may be impacted negatively in the short run by possible threats to the world economy, its strategy appears to be sound. It seems to have an improving position in a number of growth segments, and they could catalyse its financial performance. At a time when the uncertain prospects for the FTSE 100 mean that it is struggling to find direction, the stock could be a relatively appealing investment opportunity.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Peter Stephens owns shares of Rolls-Royce. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.