The Motley Fool

The Rolls-Royce share price is crashing in April! Should I buy RR today?

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.

A Rolls-Royce employee works on an engine
Image: Rolls-Royce

As a value investor, I love bottom fishing, whereby I trawl through crashed share prices looking for ‘fallen angels’. These are otherwise sound companies whose shares have steeply declined. In March 2020’s market meltdown, dozens of FTSE 100 companies were in this category. So my wife and I invested all of our cash into shares a year ago, with spectacular returns since. But while bargain-hunting in the Footsie today, I spotted an unfamiliar face: Rolls-Royce Holdings (LSE: RR.). Alas, the Rolls-Royce share price has had a bad week (and month).

The Rolls-Royce share price crashed in 2020

At its five-year peak, the Rolls-Royce share price topped 375p in August 2018. However, it had a tough 2019, closing the year at 234.45p. Then Covid-19 shut down air travel worldwide and air miles flown collapsed by at least 80%. This destroyed the share prices of airlines and their suppliers, including RR. Thus, the Rolls-Royce share price had a bad time last year. At the low of 2 October 2020, RR shares closed at a mere 38.98p. That’s a loss of over 195p, with the shares crashing by more than 80%.

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...

Rolls-Royce rockets from October 2020

Happily, over the past seven months, Rolls shares have soared. From early October, the Rolls-Royce share price staged an almighty comeback. With news arriving after Halloween of several Covid-19 vaccines, RR shares boomed. On 3 December, they closed at 134.90p (up almost 96p), for a whopping 246% gain in just two months. Clever or lucky buyers of RR shares at the October low would then be sitting on almost 3.5 times their money. Wow.

Since December, the Rolls-Royce share price has eased back, but rose to close at 127.20p on 17 March. Since then, it’s been on a bit of a downer and, recently, the Rolls-Royce share price has dropped significantly. Over one week, it is down 7.8%, putting it at #99 in the FTSE 100. Over one month, it has dived 15.2%, the worst performance in the Footsie. Ouch.

Would I buy Rolls-Royce shares at under £1?

This decline brings to mind one of my favourite Ben Graham quotes. The ‘father of value investing’ advised, “A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price”.

Do I like Rolls-Royce Holdings as a business? You bet. As a multinational aerospace and defence company around since 1904, it has a storied history. It designs, manufactures, and sells world-class power systems for aviation and other industries. But the collapse in air travel clobbered the Rolls-Royce share price. As I write, it trades at 99.9p on Wednesday afternoon.

I would buy big with the Rolls-Royce share price below £1, if not for one worry. In order to survive 2020, RR raised huge sums in bonds and loans, thus bashing its balance sheet. RR’s net debt (including leases) of £3.6bn is approaching half of its market value of £8.4bn.

But the company has £3.5bn in cash and £5.5bn in undrawn credit to ride out future storms. Although this debt mountain scares me, I lack any potential growth stocks in my family portfolio. On balance, I’d take a small punt today on Rolls-Royce getting back on track from 2022 onwards!

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Cliffdarcy 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his 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 click below to discover how you can take advantage of this.