Rolls Royce Holdings Share Price Forecast September 2021 – Time to Buy RR?
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Shares of British multinational aerospace and defense company Rolls-Royce Holdings (LSE: RR) are in the green today after closing at £126.94 as of September 23rd (18:01 UTC+1). RR shareholders have enjoyed an unusually good week as the shares are leading in the FTSE 100. RR shares have risen 14% since the market close on Friday which builds on its overall year-to-date increase of 14.3%. While the shares have fallen by more than 50%, the latest progress has interested investors who are wondering whether it’s the right time to buy RR.
Rolls Royce Holdings – Technical Analysis
The financial statement from Rolls Royce Holdings reveals a market cap of £10.622 billion with total assets worth £28.755 billion. Revenue for 2020 was at £11.82 billion with a profit margin of -26.81% compared to £16.59 billion the year before.
Moving averages for Rolls Royce Holdings are mostly indicating a buy action as evidenced by Exponential Moving Average (100)(108.12), Simple Moving Average (100)(106.77), Exponential Moving Average (200)(108.40) and Simple Moving Average (200)(107.00). Oscillators such as Relative Strength Index (14)(71.48), Stochastic %K (14, 3, 3)(98.05), Commodity Channel Index (20)(232.61) and Average Directional Index (14)(17.77) are neutral.
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Recent Developments
U.S. authorities have started loosening restrictions earlier imposed on UK flyers but they still need proof of Covid-19 vaccinations. Big airlines such as Aer Lingus and British Airways can slowly start to resume their transatlantic flights which are a huge source of revenue for them. With it, demand for engine maintenance will certainly boost the RR share price.
Rolls Royce recently sold its 23.1% holdings in AirTanker which should generate about £189 million expected to be completed by the first quarter of next year. The appointment of Anita Frew as the new chairman can see the company go into a different strategic direction, which could make investors excited about the RR share price. The company is also involved in a consortium that wants to produce nuclear reactors as well as other opportunities for renewables.
Last year, Rolls Royce reported an earnings loss which means investors do not have any information for 2020’s P/E ratio. Investors should hope that the company can get back to its 2019 earnings level in the next five years. According to US planemaker Boeing, the aviation industry is expected to reach its pre-pandemic levels by late 2023 or early 2024. This is fine for any long-term investors of RR.
Should You Buy RR Shares?
In a scenario where RR gets back to its 2019 earnings level, the P/E multiple would be 23 if we consider the current share price. Along with rising debt, investors should note that the company was already going through a tough patch before the pandemic arrived. 2021’s net debt stood at £3.1 billion, which would take its enterprise value to somewhere around £13.6 billion. This is also the total amount one would have to pay to buy the whole company and pay off existing debt.
There are many reasons for long-term investors to be optimistic about RR. The company can rerate itself once it improves its balance sheet. Its defense earnings are also reliable and stable. The recent submarine deal concluded between the UK, US and Australia can serve as a big boost for the company. While there is a good chance that RR shares will end the year at a level significantly ahead of today, there are too many uncertainties to consider. Investors should exercise caution when buying into a company emerging from economic hardships with a fairly high valuation.
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