Since mid-October, Rolls-Royce (LSE:RR) shares have jumped over 30%. I have been tracking the beaten-down engineering giant for signs of a trend reversal. The aviation industry is recovering steadily, which has triggered a host of new contracts for the firm. Some of its more recent ventures are also witnessing steady growth. 

Here, I will look at the finances, share price, and recent developments at the firm to judge if the shares hold enough value to earn a place on my growth portfolio moving forward.

Return of flight care contracts 

A vast majority of Rolls-Royce’s pre-pandemic revenue came from flight engine upkeep contracts. With flights grounded for over 24 months, most TotalCare packages were cancelled. But this year, the firm has seen a marked increase in new service agreements. 

Last week, the FTSE 100 company signed a five-year TotalCare contract with China Eastern Airlines for 10 Trent 700 engines. The firm also secured similar contracts with Malaysian Aviation Group and Air China in September. While this is still not close to pre-pandemic numbers, I see it as a definitive sign of a rebounding airline industry. 

In a recent update, Rolls-Royce stated that, as of 30 October, large engine flying hours hit 65% of 2019 levels and rose 36% since October 2021. If this recovery is sustained, the company expects revenue growth next year through these upkeep contracts. 

Power and defence

The energy crisis has accelerated renewables development. Rolls-Royce has been identified as a key provider of nuclear power in the UK and is also helping industries transition to better electricity storage units. 

The firm’s line of mtu engines, power packs, and generators is seeing wide adoption across industries worldwide. Rolls-Royce recently secured a contract to power the largest supercomputer facility in the Middle East. The company has also provided 200 mtu generators to become the UK’s leading provider of critical power solutions. The 3.5 gigawatts output powers data centres, telecom, and healthcare industries in the UK.

On the defence side, Rolls-Royce has signed a deal with the U.S. military valued at US$1.8bn to service engines for U.S. Navy aircrafts. Rolls-Royce will also provide 500 mtu engines for the UK’s Boxer armoured vehicle and 16 gensets for the German navy. 

Concerns and verdict

All these positives make me bullish on the Rolls-Royce share price at 84p, given that its pre-pandemic high was close to 350p. But I have to look at how the company can navigate some of the concerns as well.

Rolls-Royce acquired significant debt during the pandemic period. However, the board managed to complete the sale of its ITP Aero division to help the firm repay a £2bn floating rate loan by 2025. The remaining £3bn debt will continue to eat into future revenue but the recent positive development is encouraging.

Sky-high energy prices could increase flight ticket prices, further pushing back recovery. And this could prove to be a strong blow for the firm. I will be tracking this over the coming months closely.

But I do see value in Rolls-Royce shares at the moment as all its target markets are recovering. I think it has the order book and market share to navigate some turbulence. Barring any huge negative developments, I would consider a £10,000 lump sum investment in Rolls-Royce shares when I expand my portfolio next. 

The post Contracts galore! Should I buy surging Rolls-Royce shares for growth?  appeared first on The Twelfth Magpie.

More reading

• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• The SpaceX frenzy is over – is it time to look at Rolls-Royce shares again?

Suraj Radhakrishnan 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.

For years I flirted with buying Rolls-Royce (LSE: RR) shares as the aircraft engine maker hit one bout of turbulence after another. Last month, I finally took the plunge.

I’m glad I delayed. The Rolls-Royce share price has been falling for years. When I clicked the ‘buy’ button, they were down 75% over five years. That included a drop of 17.62% in month prior to the purchase, which is partly what stung me into action.

Rolls-Royce shares are climbing for now

I thought the sell-off had been overdone. I liked the idea of buying Rolls-Royce stock when investors were down in the dumps and minding their step around risky stocks like this one.

I’m feeling a little smug because the share price has jumped 30.08% in the last month, but I also know that means little. Most shares on the FTSE 100 are also in positive territory over the month, with the index climbing 6.26%. Performance over such a short timescale means nothing, but it’s still nice.

Investors are feeling more bullish as they gamble that interest rates won’t rise as fast as feared. With US inflation stateside falling to 7.7% in October, they’re hoping the US Federal Reserve will turn dovish sooner.

The recovery in Rolls-Royce shares hasn’t been purely driven by macroeconomic news. On 3 November, the company reported that the post-Covid rebound in air travel has continued, with flying hours up 36% year-to-date. The company makes much of its money from engine maintenance contracts, which are based on miles flown. When fleets are flying, so are revenues.

US and Europe have been leading the charge, although ongoing Covid lockdowns in China have hit travel across Asia.

Inflation is another headwind, but Rolls-Royce has some protection via its long-term energy and raw material supplier contracts. Debt is a worry as interest rates rise so I was pleased to see that management had used the proceeds from its completed ITP Aero disposal to pay off another £2bn. It now has around £4bn of drawn debt, of which £2.8bn does not start to mature until 2026. 

This FTSE 100 stock could fly one day

Rolls-Royce still has a long journey ahead of it, but I knew that when I bought the stock. Inflation is driving up labour costs, while further Covid lockdowns and the recession could slow air miles growth. I still think the direction of travel is clear, and positive.

It also has a long-term opportunity in building small modular nuclear reactors, although that project is still in the early stages (and will suck up capital).

While the Rolls-Royce share price is up today, it could just as easily fall tomorrow. The company still faces a host of challenges at a difficult time. Short-term dips won’t bother me, as I bought it for the long haul. 

I reckon I secured a decent entry price, although there are never any guarantees with shares. Since I hope to be holding for 10 to 20 years, I can give management time to really get the business flying. Who knows, one day Rolls-Royce might even pay me a few dividends, too.

The post I bought Rolls-Royce shares last month. I’m happy appeared first on The Twelfth Magpie.

More reading

• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• The SpaceX frenzy is over – is it time to look at Rolls-Royce shares again?

Harvey Jones holds shares in Rolls-Royce. 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.

Now may look like a bad time to buy FTSE 100 shares, but I beg to differ. Today’s turmoil offers a brilliant buying opportunity, but with three provisos.

At The Motley Fool, we never like to waste a stock market crash. Or even a dip, like the one the FTSE 100 is suffering at the moment. 

The index of top UK shares has been relatively resilient in 2022. It is down 8.09% year-to-date while the US S&P 500 has crashed 23.49%. Yet the FTSE 100’s relatively smaller drop is still throwing up lots of share buying opportunities for me.

FTSE 100 offers me great value

When an individual stock falls sharply in value, I tread carefully. Usually that’s due to a bad piece of company news, such as a profit warning, reduced dividend, or some other nasty that weighs on its prospects.

When the whole FTSE 100 falls, it’s a different matter, as good companies are sold off with the bad. Investors are fleeing risk right now, as today’s problems aren’t going away soon. Post-Covid supply shortages, war in Ukraine, and (crucially) rising interest rates are combining to destroy investor sentiment.

These problems will hit some sectors harder than others. Housebuilders such as Barratt Developments will suffer as rising mortgage rates hit demand. So will asset managers such as Schroders, as markets go haywire. Supermarkets like Sainsbury’s are also suffering, as customers buy less or trade down.

By contrast, luxury goods maker Burberry Group is on safer ground as the wealthy are less affected by the cost-of-living crisis. So is spirits maker Diageo, as its customers need a stiff drink right now.

I’m focusing my attention on companies that have been hit hardest, as their share prices have fallen most. They offer a tempting combo of dirt-cheap valuations and astonishing yields. I’ve just taken a punt on housebuilder Persimmon. I’m worried I may regret this, but found its 19.49% yield and valuation of just 4.81 times earnings too ridiculous to resist.

I’m now caught between buying Tesco for long-term income and growth, or investing in Rolls-Royce shares in the hope they will lead the charge when markets recover.

Three ways I reduce risk

The big risk is that markets could fall further from here, but I’m happy to take that chance for three reasons. First, it’s impossible to buy right at the bottom of the market. Today’s lower prices are good enough for me.

Second, I’m building a balanced portfolio of FTSE 100 stocks on top of that, to turbo-charge my growth. I aim to hold at least a dozen, so if one or two fail to deliver, hopefully the others should more than compensate.

Finally, and most important, I’m only buying shares that I plan to hold for the long term. That means at least 20 years, which should give plenty of time for the FTSE 100 to rebound from its current troubles.

Sometimes I have to steel myself to click the ‘buy’ button but if I wait until after the FTSE 100 has recovered, then the same stocks should cost a lot more than they do today.

The post I don’t care if FTSE 100 shares fall further, I’m buying them today appeared first on The Twelfth Magpie.

More reading

• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has recommended Burberry, Diageo, Schroders (Non-Voting) and Tesco. 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.

Rolls-Royce (LSE: RR) shares just go from bad to worse. Yet this remains one of the UK’s most traded stocks as investors still believe there is a great opportunity here. So far, it’s been a losing bet, with the stock sliding 80% over the last five years.

Bargain hunters who bought 12 months ago have lost 53.97% of their money. Anyone who bought a month ago is down 17.89%.

The civil aerospace, power systems and defence engineer may have a Roll-Royce name, but the underlying business is anything but smooth. The pandemic was tough on its aerospace business, which generates most of its revenues from maintenance contracts attached to its engine sales. These are based on miles flown, a disaster as Covid grounded fleets.

The shares have been a losing bet

A company that posted almost £4bn of pre-tax profits in 2017 suffered a £294 million loss last year. This year, it anticipates low-to-mid-single digit underlying revenue growth, but I suppose that’s better than nothing. Last year’s underlying operating profit margin of 3.8% will be repeated this year, which suggests the turnaround will take time.

Departing chief executive Warren East was admired for his valiant but doomed battle to turn this crate around. New CEO Tufan Erginbilgic is picking up the mantle at a pivotal time for the £5.54bn FTSE 100 business.

Rolls-Royce recently reported a drop in first-half underlying operating profit from £307m to £125m. While dispiriting, this also reflected £371m in research and development costs designed to grow the business.

Its Power Systems division reported record order intake, while Civil Aerospace engine flying hours continue to recover and its Defence arm boasts a strong order book. So all is not lost.

Yet we live in a world of worry, as supply chain problems persist, energy prices soar and inflation rockets, pushing up the costs of key raw materials like titanium. This will all weigh on any Rolls-Royce recovery.

The FTSE 100 is packed with stocks trading at price/earnings ratios of less than 10 while offering dividend yields of 5% and, in some cases, a lot more. Rolls-Royce trades at a whopping 185.5 times forecast earnings and doesn’t pay any dividends. It may restore shareholder payouts next year, with free cash flow now “modestly” positive, but I’m not holding my breath.

I’m taking a small punt on this stock

It still has debt of more than £5bn, although it also has access to £7.1bn of liquidity, including £2.6bn in cash holdings.

Rolls-Royce does have an exciting opportunity in building small modular nuclear reactors that can power a million homes for around £2bn a pop. However, this is a 25-year programme that demands upfront capital investment, so the payback time will be slow.

The same could be said of Rolls-Royce shares. I think they have an opportunity to snap back when sentiment improves. Since that is impossible to time, I’m going to take a small position in the next few days. I just hope I don’t end up joining a long line of unlucky gamblers.

The post Rolls-Royce shares are down 18% in a month and I’m finally going to buy them appeared first on The Twelfth Magpie.

More reading

• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?

Harvey Jones doesn't hold any of the shares mentioned in this article. 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.

After a torrid pandemic period, many analysts, including myself, expected Rolls-Royce (LSE:RR) shares to recover in 2022. However, the engineering firm’s stock is down over 52% in the last 12 months and is amongst the five worst performing FTSE 100 shares for this period.

I have been looking for a quality business to invest £1,000 in before 2023. My criteria are that it must be cheap, offer value, and operate in exciting areas. 

While Rolls-Royce shares look really cheap on paper at current levels, is it the best option for my growth portfolio at the moment? Let’s find out. 

The positives

Rolls-Royce’s balance sheet is improving. Increasing orders from its civil aviation wing for aircraft engines and maintenance is a positive. While international air travel hasn’t recovered as expected, it is still 52% higher than 2021 levels. This could benefit Rolls-Royce shares over the coming months, especially since the pandemic’s fear has died substantially. 

The growth of Rolls-Royce’s new power systems wing is promising. Defence contracts are improving too, fuelled by the Russian invasion of Ukraine. 

The company will play a vital role in the US Department of Defense nuclear microreactor program alongside BWX Technologies. This promising development comes after a long line of orders for Rolls-Royce’s nuclear reactor program, including from the UK government. 

However, the big question for me here is how will the UK’s struggling economy affect this recovery? 

Will the Rolls-Royce share price stagnate? 

Firstly, it is not just one stock that is suffering. The Footsie is down 8.5% in the last six months, pointing to a market-wide pullback. However, Rolls-Royce’s struggles are unique in some ways. The blue-chip firm operates in tough sectors like defence, aviation, and energy. It is constantly among the highest-traded stocks in the UK. Despite these factors, investors are exiting fast. 

One of the perks of investing when the market is down is that stable businesses often rebound quickly, giving smart investors solid returns in a shorter span. However, I do not see this happening with Rolls-Royce shares. Mounting debt has weighed this business down this year. Net debt currently stands at £5.14bn. 

While the £1.4bn sale of ITP Aero will be factored in at the end of this year, debt will still be a concern in 2023. The business returned to profitability in 2021. But due to the high R&D budget, interest payments will continue to chip away at profits for the foreseeable future.

The order book of £6.5bn will help maintain a positive cash flow moving forward. But I have to factor in spendings too. Increasing pressure on renewable power sources means all nuclear projects will be accelerated. This means higher wages and faster turnarounds which will deplete its profits. 

New Prime Minister Liz Truss has also stressed the importance of the UK boosting its own oil and gas reserves. Right now, the energy sector looks fractured with the push for renewable energy proving too expensive. How the new leadership chooses to address this will vastly impact industry profits going forward, especially for firms like Rolls-Royce that have invested heavily in renewables. 

All this adds to the uncertainty around Rolls-Royce shares which is why I am choosing to keep away at the moment, despite the latest crash. 

The post At 69p, are Rolls-Royce shares too cheap to miss?  appeared first on The Twelfth Magpie.

More reading

• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• The SpaceX frenzy is over – is it time to look at Rolls-Royce shares again?

Suraj Radhakrishnan 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.

Rolls-Royce (LSE:RR) shares were one of the biggest losers on the FTSE since the pandemic struck over two years ago, in my opinion. I’ve been keeping a close eye on developments, as well as wondering when the right time could be for me to add them to my portfolio. Now is that time. Here’s why I’ve decided to take the plunge and buy some shares.

Rolls-Royce shares woes

Rolls-Royce’s fall from grace since 2020 has been well-documented. With fleets grounded and the aviation industry in ruins due to the pandemic, it was never going to be an easy ride.

The Rolls-Royce share price has experienced a dramatic fall. As I write, the shares are trading for 73p. Before the pandemic caused a market crash in February 2020, the stock was trading for 232p. This is a 68% decline. They dipped as low as 38p in September 2020, which is a 83% drop from pre-crash levels. Over the past 12-months, the shares have fallen 42% from 126p to current levels.

Why I’m buying shares

So what has made me decide to buy Rolls-Royce shares now? Well, to start with, its last two trading updates have shown me signs of life. In March, it released full-year results for the year ended 31 December 2021, reporting an operating profit for the first time in two years. This was due to the aviation industry reopening post-pandemic. More recently, it released a half-year report for the period ended 30 June 2022. This report showed that revenue, profit, margin, and free cash flow all increased compared to 2021.

With Rolls-Royce capitalising on recent upward trends, I believe it could continue to capitalise on two main fronts. Due to the unfortunate events in Ukraine, defence spending is set to increase. This could boost its balance sheet and performance overall. Air travel and the aviation industry as a whole have experienced unprecedented demand recently. It seems as though restrictions gave consumers a new zest for travelling.

Finally, looking at Rolls-Royce’s fundamentals, I notice that its forward looking P/E-to-growth ratio (PEG) is below 1. Many believe that a ratio under 1 shows that the stock could be undervalued based on its potential growth prospects.

Risks to note

Despite my decision to buy Rolls-Royce shares, I am aware of potential challenges ahead. During its turbulent period, the company had to borrow to keep the lights on, which means it does have debt on its balance sheet. This could affect growth and returns, especially in the shorter term.

Current macroeconomic headwinds could also prevent Rolls-Royce from growing as quickly as it would like. Soaring inflation and rising costs could impact profitability. Furthermore, a cost-of-living crisis has emerged. These rising costs and potentially weaker demand, based on tighter budgets for consumers, could restrict performance and returns.

In conclusion, I am aware that Rolls-Royce isn’t out of the mire just yet. I fully expect some further issues ahead. However, my investment strategy has always been to invest for the long term. In this time period, I believe it could return to former glories which could make it a shrewd addition to my portfolio right now. I’m going to buy a small number of shares, and keep a close eye on developments.

The post I’m taking the plunge and buying Rolls-Royce shares. Here’s why! appeared first on The Twelfth Magpie.

More reading

• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• The SpaceX frenzy is over – is it time to look at Rolls-Royce shares again?

Jabran Khan 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.

It’s been a turbulent few years for Rolls-Royce (LSE: RR) shares. The business has struggled in recent times as we’ve lurched from crisis to crisis. The stock took a massive tumble as the Covid-19 pandemic hit. Since then, it hasn’t really recovered.

This is largely due to the current macroeconomic environment. Stocks from a variety of industries have found themselves struggling this year as inflation and the Russia-Ukraine conflict have seen investors lose confidence in the market. This year alone, Rolls-Royce stock is down nearly 40%.

However, at their current price, Rolls-Royce shares look cheap. So, should I be rushing to add the FTSE 100 firm to my portfolio?

Rolls-Royce positives

Well, there are a few tempting factors for me.

Firstly, the business is heavily reliant on a flourishing aviation sector because it sells and services engines. This is the reason it took such a hit during the pandemic. However, with international travel edging ever closer to pre-pandemic levels, this should hopefully provide a boost for the firm going forward.

Elsewhere, Rolls-Royce is also set to benefit from an increased focus on defence spending. Its defence division is its second-largest revenue generator. And as the conflict in Ukraine has seen many countries across Europe place a greater emphasis on security, Rolls-Royce has already an order backlog for over £1bn just from the first half of this year.

This heightened awareness includes the UK, where new prime minister Liz Truss recently pledged to increase the defence budget to 3% of GDP by 2030, equating to £27bn of spending.

The business has also streamlined in the last few years, including a restructuring programme. While the months ahead could be tough as the UK stares a recession in the face, the streamlining could help the firm navigate this. The first half of the year also saw a £1.1bn free cash flow improvement. These are all encouraging signs.

Debt concerns

The biggest issue I see with Rolls-Royce is its debt, which as of 30 June stood at £5.14bn. The recent sale of ITP Aero to private equity firm Bain Capital for £1.5bn will alleviate the strain this debt places on the business. However, it’s still of major concern to me. On top of this, rising interest rates will only mean the debt becoming a steeper challenge to overcome.

The business is also engaged in a dispute with its workers as they bargain for better pay. Its latest offer was a 6.5% basic pay increase backdated to from 1 March. However, like all its previous offers, it was rejected. As a result, Rolls-Royce workers are now set to vote on industrial action in the weeks ahead. Should strikes occur, this would be negative for for Rolls-Royce and its share price.

Should I buy?

The shares look cheap. However, I won’t be buying them today. A greater emphasis on defence spending should see the firm prosper. But I think it faces too many headwinds in the months ahead to justify buying the stock right now. While I see long-term value here, I’m placing the stock on my watchlist. If its falls further, I could be tempted to open a small position.

The post Is it time to buy cheap Rolls-Royce shares? appeared first on The Twelfth Magpie.

More reading

• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• The SpaceX frenzy is over – is it time to look at Rolls-Royce shares again?

Charlie Keough 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.

The further Rolls-Royce (LSE: RR) shares fall, the more investors seem convinced they’re a bargain. The FTSE 100-listed aircraft engine maker is hugely popular. Yet those who took the plunge and bought its stock at various points in the last half decade will have been disappointed so far.

Rolls-Royce shares have crashed by 74.94% over five years, and by 31.53% over 12 months. They’re down 16.37% over six months too, largely missing out on the summer rally. Yet still investors continue to live in hope.

I get that. Investors love buying good companies at reduced prices, and Rolls-Royce fits that profile. Back in 2014, its shares traded above £4. Today, they’re on offer for 77p. But do they really offer me good value?

Rolls-Royce shares have fallen a long way

The Rolls-Royce share price isn’t the only thing that has fallen. Its revenues have dropped from £14.74bn in 2017 to £11.21bn in 2021. Over the same period, its pre-tax profits plunged from £3.9bn to a loss of £284m.

Outgoing chief executive Warren East has been punished by forces beyond his control since his appointment in July 2015. On his second day in the job, he was forced to deliver a profits warning for the group’s core aerospace propulsion business, amid troubles with its Trent 700 engines.

Maybe he shouldn’t have been surprised. That was Rolls-Royce’s fourth profits warning in less than two years. East also found himself apologising for a bribery scandal that predated his tenure, which triggered £671m in penalties. The Covid pandemic that hammered the global aviation industry wasn’t his fault either. 

The market still admires him. Now investors are waiting to see whether new CEO Tufan Erginbilgic will be luckier than the last one

There are some positive signs, as the defence division now boasts a healthy £6.5bn order book. It should also benefit from rising geopolitical disorder, and concerns over China’s intentions towards Taiwan. 

There’s no dividend but cash flow looks more positive

The civil aerospace division could see demand for its jet engines revive too as Covid fears subside and international travel picks up. However, the global recession and energy shock may dent business and consumer demand.

Management is fighting inflation and supply chain disruption by sharpening its focus on “pricing, productivity and costs”. It’s expecting low-to-mid-single-digit underlying revenue growth this year. Underlying operating profit margin should be broadly unchanged on last year’s 3.8%, with “modestly” positive free cash flow in 2022.

There’s no dividend though, and the stock is hard to value with a forward P/E of 94.8 times earnings (down from last year’s 697.4 times). Buying Rolls-Royce shares today is a leap in the dark. I’d buy them now, but with one proviso. I’d aim to hold for a minimum 10 to 15 years, to give enough time for the stock to recover from its serial setbacks and get growth and dividends back on track.

The post Rolls-Royce shares have fallen 75% in five years. I’d buy them today with one proviso appeared first on The Twelfth Magpie.

More reading

• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• The SpaceX frenzy is over – is it time to look at Rolls-Royce shares again?

Harvey Jones doesn't hold any of the shares mentioned in this article. 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.

2022 has been a year characterised by surging inflation. Caused by supply bottlenecks from Covid-19, ultra-low interest rates, and magnified by the Russia-Ukraine crisis, inflation reached 10.1% in the UK in July. Across the Atlantic, the situation was similar, with prices rising 8.7% year on year in July.

With inflation rising, central banks are hiking interest rates. This is placing big pressure on growth stock valuations, as people pull their money out of speculative assets. At historically low prices, I’m looking for bargain growth stocks that could land me some big returns in the future. Below are two stocks I currently have my eye on.  

NIO

NIO (NYSE: NIO) is a Chinese electric vehicle manufacturer. It had a standout year in 2020, when its shares climbed over 1,100%. However in 2022, things haven’t been as easy with the shares falling 40% year-to-date. Over 12 months, the shares are down 47%.

The reason I like the look of this stock is due to its remarkable results. In Q1, the firm saw its year-on-year deliveries rising by 29%, with revenues climbing by 24%. Although NIO is still loss-making, its losses shrank 10% compared with the previous quarter, which is a good sign. In 2021, revenues soared by over 122%!

NIO also boasts some market-leading tech when it comes to battery charging. Its cars feature unique battery swapping technology that can be applied in a matter of minutes. Being the only manufacturer to offer this service, I think the stock is well poised to capture market share.

Rolls-Royce

Rolls-Royce (LSE: RR) is a UK-based civil engineering and defence company. It was hit hard by the pandemic in March 2020 and recorded a hefty £4bn loss for that year. However, recently the firm reported a profit for the first time since then, signalling a strong recovery so far in 2022.

Rolls makes the majority of its money from servicing aeroplane engines. With global travel increasing, I think Rolls could be in a great spot for growth this year. In 2020, just 1.8bn travellers boarded planes. Fast forward to 2022, and it’s predicted that 3.5bn customers will board flights. This should help boost revenues so the group can keep delivering profits.

Rolls is also leading the stride in small-to-medium-sized nuclear reactor technology. It expects to receive clearance to roll out these reactors by 2024 and has already signed contracts with governments around the world to implement them.

The caveat

I think that both of these companies exhibit some great fundamentals. However, no matter how these firms perform over the coming year, rising inflation could continue to plague their stock prices. If this is the case, then they could fall even lower – regardless of their encouraging results. However, adopting a long-term view, I think these stocks could be great additions to my portfolio at their current prices.

The post Here are two beaten-down growth stocks I like the look of today appeared first on The Twelfth Magpie.

More reading

• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• The SpaceX frenzy is over – is it time to look at Rolls-Royce shares again?

Dylan Hood 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.

Director dealings are essentially insider transactions for shares between directors and the companies they work for. These dealings are always made public, and are often considered a good indicator of a company’s future prospects. However, they don’t get nearly as much attention as other company news due to their complex nature. Nonetheless, here I’m breaking down this week’s biggest director dealings from three FTSE firms.

Rolls-Royce

Rolls-Royce (LSE: RR) is a British multinational aerospace and defence holdings company. It is one of the world’s largest makers of aircraft engines, and operates in four different segments. These include civil aerospace, power systems, defence, and new markets.

After a disappointing set of H1 results, Rolls-Royce shares saw yet another decline. But this week, a number of director dealings were carried out. Most notably, there was a huge purchase of shares from Chairwoman Anita Frew. The purchase from such a senior director should improve sentiment surrounding the stock.

• Name: Anita Frew
• Position of director: Chairwoman
• Nature of transaction: Purchase of shares
• Date of transaction: 5 August 2022
• Amount bought: 50,000 @ £0.83
• Total value: £41,300

• Name: Lee Hsien Yang
• Position of director: Non-Executive Director
• Nature of transaction: Share purchase plan
• Date of transaction: 8 August 2022
• Amount bought: 1,161 @ £0.84
• Total value: £980.23

• Name: Wendy Mars
• Position of director: Non-Executive Director
• Nature of transaction: Share purchase plan
• Date of transaction: 8 August 2022
• Amount bought: 2,156 @ £0.84
• Total value: £1,820.31

• Name: Sarah Armstrong
• Position of director: Chief People Officer
• Nature of transaction: Share purchase plan
• Date of transaction: 9 August 2022
• Amount bought: 175 @ £0.86
• Total value: £149.84

• Name: Rob Watson
• Position of director: President (Rolls-Royce Electrical)
• Nature of transaction: Share purchase plan
• Date of transaction: 9 August 2022
• Amount bought: 175 @ £0.86
• Total value: £149.84

Admiral

Admiral (LSE: ADM) is a British-based insurance company. It specialises in car insurance products, but also has a line of other offerings. These include home insurance, travel insurance, pet insurance, and van insurance.

The FTSE 100 firm released its H1 results earlier this week. Although profits slumped by almost half, the stock still shot up by 15% this week. This was most likely due to the announced special dividend of 15.8p. This would bring its total dividend to 60.0p per share. Investor sentiment was also further boosted when the Chairwoman purchased shares worth over £25,000.

• Name: Annette Court
• Position of director: Chairwoman
• Nature of transaction: Share purchase plan
• Date of transaction: 11 August 2022
• Amount bought: 1,181 @ £22.44
• Total value: £26,501.64

Dunelm

Dunelm (LSE: DNLM) is one of Britain’s biggest home furnishings retailers with an ever-growing market share. It operates over a 170 stores throughout the UK and offers over 50,000 products across a broad range of categories.

The FTSE 250 firm released its Q4 trading update not too long ago, and the interim numbers resonated well with investors. Nevertheless, its bottom line figure is yet to be released, and investors are wondering whether their expectations will be met. Therefore, the recent purchases by its CFO and another director could be an indicator of an earnings beat. The company is expected to report its official FY22 results in less than a month’s time.

• Name: Vijay Talwar
• Position of director: Non-Executive Director
• Nature of transaction: Purchase of shares
• Date of transaction: 4 August 2022
• Amount bought: 9,670 @ £8.50
• Total value: £82,156.32

• Name: Karen Witts
• Position of director: Chief Financial Officer
• Nature of transaction: Purchase of shares
• Date of transaction: 5 August 2022
• Amount bought: 1,174 @ £8.45
• Total value: £9,922.18

Types of shares

To provide context, there are a few types of shares that can be purchased by directors. Some directors opt to purchase shares via the open market. Having said that, directors also have the option to purchase shares via a share incentive plan (SIP).

A SIP is an employee plan for companies within the UK to flexibly award shares to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this week’s set of director dealings, a certain number of directors opted to purchase shares via their companies’ share purchase plans. This allows employees to purchase shares through automatic deductions from their pay. And this was the case with a number of Rolls-Royce directors, as well as Admiral’s Chairwoman.

The post Director dealings: Rolls-Royce, Admiral, Dunelm appeared first on The Twelfth Magpie.

More reading

• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• The SpaceX frenzy is over – is it time to look at Rolls-Royce shares again?

John Choong has positions in Dunelm Group. The Motley Fool UK has recommended Admiral Group. 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.