If I’d invested £1k in Rolls-Royce shares at the start of 2023, here’s how much I’d have now!
Rolls-Royce (LSE:RR.) shares have been a stellar investment in 2023. The aerospace and defence business delivered excellent financial results for FY22, which sent the share price skyrocketing. So far, its gains are unmatched by any other FTSE 100 company.
Fortunately, I invested in the stock before the good news was released and I’m currently sitting on a healthy profit.
So, how much would a £1,000 investment in Rolls-Royce have delivered since the beginning of the year? Let’s explore.
The Rolls-Royce share price has climbed nearly 53% this year to date. That’s a remarkable comeback for a stock that was trading in pennies throughout much of the pandemic.
With £1,000 to invest at the start of the year, I could have bought 1,011 shares at 98.91p apiece. At today’s price of 151.12p, my shareholding would be valued at £1,527.82.
That’s a remarkable gain, but the short timeframe flatters the company somewhat. Many longer-term investors are still deep in the red. For instance, those who bought shares five years ago would have a holding today that’s worth less than half their initial investment.
Despite a positive recent set of earnings, this is a stark reminder that the company faces a long journey to return to full financial health.
The outlook for the shares
Looking ahead, the company’s guidance for 2023 suggests Rolls-Royce is confident it can build on last year’s impressive performance. The operating profit forecast is £0.8bn-£1bn, compared to £0.65bn in 2022.
In addition, the business expects to generate £0.6bn-£0.8bn in free cash flow, up from £0.51bn last year. Achieving this goal will be critical if the gains are to be sustained, especially as the £3.3bn in net debt on the company’s books remains a concern.
Rolls-Royce has three main sources of revenue, which totalled £12.7bn across the company’s divisions last year.
|Rolls-Royce division||Percentage of underlying revenue|
The firm’s bullish guidance for 2023 rests on large engine flying hours returning to 80%-90% of 2019 levels. That looks like a punchy target, but January’s data from the International Air Transport Association (IATA) shows positive momentum in the travel sector, with international traffic reaching 77% of January 2019 levels.
Rolls-Royce’s Defence arm is benefiting from elevated geopolitical tension caused by the war in Ukraine. The US and UK governments collectively represent 75% of the company’s customer base for this division. A focus on defence spending in both countries bodes well for the business.
Finally, the company’s Power Systems division continues to exhibit strength. 2022 was a record year for the order book and order intake. Rising demand for low-carbon technologies should help the firm, which has increasingly focussed on hydrogen engines and other sustainable solutions.
Should I buy more, hold, or sell?
Overall, the outlook for the Rolls-Royce share price looks positive to me. However, there are notable risks. Debt is an obvious one. In addition, there’s a possibility investors could take profits after the recent surge, which could send the shares lower in the short term.
I’m comfortable with my position at present, and I’ll be holding my stake. If any big dips materialise as the year unfolds, I’ll consider investing more.
The post If I’d invested £1k in Rolls-Royce shares at the start of 2023, here’s how much I’d have now! appeared first on The Motley Fool UK.
Like buying £1 for 51p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
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Charlie Carman has positions in Rolls-Royce plc. 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.