At UK£2.08, Is It Time To Put Rolls-Royce Holdings plc (LON:RR.) On Your Watch List?

Today we're going to take a look at the well-established Rolls-Royce Holdings plc (LON:RR.). The company's stock saw a significant share price rise of over 20% in the past couple of months on the LSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Rolls-Royce Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Rolls-Royce Holdings

What Is Rolls-Royce Holdings Worth?

Great news for investors – Rolls-Royce Holdings is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.53x is currently well-below the industry average of 24.22x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because Rolls-Royce Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Rolls-Royce Holdings look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Rolls-Royce Holdings, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although RR. is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to RR., or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on RR. for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 4 warning signs for Rolls-Royce Holdings (2 are potentially serious!) that we believe deserve your full attention.

If you are no longer interested in Rolls-Royce Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.