Rolls Royce Shares Still Undervalued, say Analysts

Shares in engine maker Rolls-Royce are still below their fair value, despite a 13% rally today following positive results

Jeffrey Vonk 7 March, 2018 | 2:37PM
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Rolls-Royce Shares Rose 13%

Rolls-Royce reported excellent 2017 results, as profits beat Morningstar analysts’ estimates, driven by strong activity in civil aerospace and power systems.

The company’s shares rose 13% after the engine maker posted pre-tax profits of £4.9 billion for 2017 against a loss of over £4 billion in 2016. Despite the recent strong share price increase, we believe the shares are still undervalued. We are updating our estimates for the latest developments, which will most likely result in a modest increase in our fair value estimate of 970p a share, around 5%. We maintain our narrow moat rating, which means the company has a slender competitive advantage.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rolls-Royce Holdings PLC135.10 GBX-2.10Rating

About Author

Jeffrey Vonk  is an equity analyst with Morningstar.