Hearing the name Rolls-Royce, you might be inclined to point toward the luxury automobile maker carrying the same name. But it’s important to make a distinction between Rolls-Royce as a subsidiary of the parent company BMW, and Rolls-Royce (LSE:RR) which maintains one of the largest manufacturers of airline engines as well as other critical components found in military defence.
In this edition of Deal, No Deal, we will take a look at the latter to see how this historic company is currently fairing in a COVID-riddled world and its stock prices can be a valuable addition to your portfolio.
Quantitative Analysis: Not Looking so Bright
Unfortunately for Rolls-Royce, their stock isn’t doing particularly well in today’s business world despite being in the top 20 defence contractors in 2018. Their year-to-date performance is currently down from GBP 127 to today’s GBP 94.64 (April 9, 2022), which follows from their ballooning debt of GBP 5.2 billion in 2021.
Their current EPS (earnings-per-share) stands at a low 0.11 pence, low by most large-cap companies currently in the market as part of the FTSE 100 Index.
Qualitative Analysis: New Leadership, Same Company
There are many things currently working against Rolls-Royce as a company, which might explain its recent financial troubles. Currently, the COVID-19 pandemic has continued to affect global travel, which in effect lessens the demand for airline and their subsequent component parts. Moreover, current CEO Warren East is poised to leave the company by the end of 2022, and a successor is yet to be chosen for the role. With so much uncertainty both inside and outside the company, it can be tough to say when exactly the company’s financials will begin to look on the bright side.
As it stands, Rolls-Royce is a tough deal for anyone to want to be on. Their low price valuation is driven by difficult financial performance and even more worrying future prospects can make it difficult to see when the company will eventually bounce back.
But eager investors looking for a possible value stock can choose to get in on the stock price while it’s low, but these investors need to be mindful that a play like this is likely to only play off in the very long term.
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only