Are Rolls-Royce shares too expensive to buy now at 208p?

 Are Rolls-Royce shares too expensive to buy now at 208p?

Shares in Rolls-Royce (LSE: RR) continue to rise. They are up 40% in the last week, 90% in six months and 140% in one year.I'm happy to say that I bought shares in the FTSE 100 aero engine maker right at the start of their sharp recovery on November 1 at around 81p. Today the share price is 208p.

I'm up 155% which is absolutely great... but for one thing. I was low on funds at the time and bought a smaller share than usual.Today I have more money available after transferring three older pensions to a Self Invested Personal Pension (SIPP). But is Rolls-Royce too expensive now?

A real high roller

I much prefer to buy stocks when they are down in the doldrums than when they are flying high. This makes me cautious. Mainly because I want to increase my holding significantly and could easily wipe out my gains so far if the stock pulls back from here.

The speed of Rolls-Royce's recovery has surprised everyone, including myself and new CEO Turfan Erginbilgic. Its share price has been highly volatile during the pandemic as profit-seekers battled it.The recent acceleration is built on firmer fundamentals, following a recent 31% jump in underlying revenue in the first half to £6.95 billion.

Full-year profits have been lifted to £1.2bn-£1.4bn (from a range of £800m-£1bn) and cash flows will also grow sharply.This is due to a number of factors, including the recovery of airline miles flown, new contracts, strong performance from its defense and energy systems operations and cost-saving measures implemented during the dark days.

Rolls-Royce also has a new product to excite investors in the form of a planned £2bn fleet of mini-nuclear reactors. It reminds investors that it could still be a great British engineering company.In 2022, Rolls-Royce reported net sales of £13.25 billion. Markets now expect it to exceed £14.4 billion in 2023 and £15.4 billion in 2024. Investors can even look forward to a dividend next year, although it will start on a low base with an initial forecast yield of 0.63%.

Debt doesn't bother me

This all looks promising for the stock, which currently trades at just 18.7 times 2023 earnings. But has Rolls-Royce been overbought?One of the long-term problems is debt. Rolls-Royce still owes £2.8bn, which will make investment in product development more difficult. I'm not too worried though. In 2021 it was £5.2bn. Last year it was £3.3bn. Net debt is moving in the right direction thanks to sales and better cash flow.

Rolls-Royce has plenty of tailwinds, but my big concern is that these are included. Expectations are now sky-high and if it doesn't happen, sentiment could change. Finally, Soda's Law also makes me hesitate. If I stack up now, surely the stock will go down, right?Nevertheless, I have one strong argument in favor. If I were to buy a Rolls-Royce today, it would be with the aim of holding it for 10 years and ideally much longer. With any luck today's 208p share price will one day look cheap. I think I'll take a chance and buy it this month.

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Harvey Jones has positions in Rolls-Royce Plc. The Motley Fool UK has no position in any of the stocks listed. The opinions expressed about the companies mentioned in this article are the opinions of the author 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 we are better investors with a diverse range of insights.

Rolls-Royce Holdings (LSE: RR) is a globally recognized name in the aerospace and engineering industry, known for its high quality products and innovative technologies. For investors eyeing the prestigious marque, the question is: Are Rolls-Royce shares too expensive to buy now at 208p? In this article, we'll delve into the current state of Rolls-Royce, analyze its recent performance and consider factors that could affect its future, helping you make an informed investment decision.

Rolls-Royce Shares: Slide

According to the latest data available, Rolls-Royce shares are trading at 208p, a particular price point that is attracting investors' attention. While it is important to consider the stock price, it is equally important to evaluate the overall market sentiment, the company's financial health and its growth prospects.

 Recent performance

Rolls-Royce, like many companies, has experienced its fair share of challenges, especially due to the unprecedented disruptions caused by the global pandemic. However, the company is working diligently to overcome these obstacles and position itself for future growth.

The aerospace industry, which is a significant part of Rolls-Royce's operations, has seen a gradual recovery as demand for air travel has recovered. This trend can positively affect the company's finances in the coming quarters.

 Growth prospects

Rolls-Royce has a history of innovation and a strong reputation in its industry, which bodes well for its growth potential. The company is actively involved in the development of advanced drive solutions and expansion into new markets.In addition, the move towards sustainable energy solutions provides Rolls-Royce with an opportunity to use its engineering and technology expertise to tap into the green energy sector and further diversify its revenue.

Industrial factors

Understanding the broader industry environment is critical in assessing the future of a company. The aerospace and engineering sector is affected by a variety of factors, including technological advances, regulatory changes and economic conditions. It is essential that you are informed of these developments and assess how they may affect Rolls-Royce's business.

While Rolls-Royce's share price at 208p may seem high, it's important to remember that share prices are only one part of the equation. A comprehensive analysis of the company's current performance, growth prospects and industry factors is necessary to determine whether it is a suitable investment.

Investors should consider their own risk tolerance, investment objectives and time horizon before making any decisions. Consulting with a financial advisor or doing additional research can provide valuable insights tailored to your specific situation.

Rolls-Royce's strong brand, technological prowess and potential growth opportunities make it an attractive candidate for long-term investors, but prudent due diligence is essential for an informed decision. Rolls-Royce stock, 208p, investment, aerospace, engineering, growth outlook, financial health, industry factors, share price, investor, analysis, technology, sustainable energy, market sentiment.