It’s been one of the big recovery successes after the pandemic. But how well would investors who bought Rolls-Royce Holdings (LSE: RR.) shares in the depths of the crash be doing now?

The shares remained in the dumps until 2023. But, so far this year, the price has trebled. That’s following two big jumps, after FY22 and H123 results both beat expectations.

We’re still looking at a 42% fall over five years though. So there might be more to come.

£10k today?

A £10k investment in Rolls-Royce shares at the lowest point of 2020 would now be worth £57k. That’s a stunning gain in such a short period, but it wasn’t an easy get-rich-quick punt. Those who put down their hard-earned cash when times looked so dark took a huge risk.

Rolls had to take on piles of debt to keep going, and there was a real chance the venerable UK firm could go bust.

But when an investor takes the plunge and knows they could lose everything, I take my hat off to them.

Back to the past?

But what chance do Rolls-Royce shares have of getting back to pre-crash levels and beyond? We need to do some comparisons and look at some before-and-after numbers.

For 2019, the last year before Covid stopped the aviation business in its tracks, Rolls reported underlying revenue of £15.5bn and an underlying operating profit of £808m.

Wind forward to 2022, and we see revenue at £12.7bn with operating profit at £652m. Wow, that’s over 80% of pre-crash levels on both counts.

Cash flow

What about cash? Well, 2019 brought free cash flow of £873m, while 2022 delivered £505m. So we’re back to 60%, which isn’t as good as the profit recovery. But after the past few years, I think it’s a terrific result.

Purely by looking at these figures, we might expect the shares to trade at around 170p, or about 70% of the 2019 year-end price. But wait, Rolls-Royce shares are ahead of that today, at 202p. In fact, they’re already back up to 80% of pre-crash levels.

Too low, or too high?

One thing makes them still look cheap to me. And another makes them look expensive.

Rolls was already struggling in 2019, needing to slim down, cut costs, and dispose of non-core assets. Today, that’s all been done, and the outlook appears a lot brighter. Forecasts suggests strong profit rises, with free cash flow reaching £1.5bn by 2025.

That’s the good thing. But the not-so-good thing is debt.

Debt

At the end of 2019, Rolls had net cash of £1.4bn. By 2022, net debt of £3.25bn.

Big differences in the cash/debt situation can really throw off valuations that might otherwise be comparable. Still, 2022 year-end debt was about £2bn lower than a year before. And by the halfway point of 2023, it was down futher, to £2.85bn.

So is the current share price too high or too low? You know, like the baby bear’s porridge, I think it might be just right. A patient long-term buy, perhaps.

The post £10k invested in Rolls-Royce in the Covid crash would be worth this much now appeared first on The Motley Fool UK.

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Alan Oscroft 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.