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Is Now The Time To Look At Buying Rolls-Royce Holdings plc (LON:RR.)?

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·3-min read
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Let's talk about the popular Rolls-Royce Holdings plc (LON:RR.). The company's shares saw a significant share price rise of over 20% in the past couple of months on the LSE. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Rolls-Royce Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See 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. My valuation model shows that the intrinsic value for the stock is £1.77, but it is currently trading at UK£1.20 on the share market, meaning that there is still an opportunity to buy now. 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 kind of growth will Rolls-Royce Holdings generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. 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 undervalued, the negative outlook does bring on some uncertainty, which equates to higher 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 research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Rolls-Royce Holdings as a business, it's important to be aware of any risks it's facing. Be aware that Rolls-Royce Holdings is showing 5 warning signs in our investment analysis and 3 of those are a bit concerning...

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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