Stock market

If I would have bought Rolls-Royce shares a year ago, I have them now

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Whoever bought it. Rolls Royce Holdings (LSE: RR.) Shares would now be sitting on a gain of around 190% this time last year.

That’s enough to turn every £1,000 invested in stocks into £2,900. Shame I didn’t buy any.

But what could happen in the next 12 months? Well, when it comes to the stock market, the short-term future is the most difficult to predict.

But I’ll stick my neck out and say… I don’t think we’ll see another 190% gain.

The coming year

Shareholders seemed to be taking some profits off the table. But after a small dip in April, Rolls-Royce’s share price has started to climb again.

So what do the experts think will happen in the next 12 months?

Well, the forecast suggests an 11% increase in EBITDA this year, and that’s just the beginning. They have another 14 percent on the cards for 2025, followed by another 9 percent in 2026.

We are looking at a fairly high price-to-earnings (P/E) ratio of 31 this year. But that forecasted revenue could drop to 22 by 2026.

Is this still a reasonable P/E for one? FTSE 100 Growth stocks? I think it could be.

Price targets

City analysts seem to think so too, and there’s a pretty strong consensus on the purchase at the moment. Moreover, as the months go by, the boom is getting stronger.

Although brokers’ price targets are not overly inflated. The range seems to be centered around the 450-500p range at the moment.

And with Rolls-Royce’s share price at 440p at the time of writing, it looks like analysts will join me in not expecting to see another 190% anytime soon.

Still, given this, I must sound a loud caution. My experience with broker targets over the years has not led me to place too much faith in them.

I think that if I always rate a stock that’s rising as a ‘buy’, and always set a price target that’s slightly higher than the latest price, I’ll probably buy more of them. I can do it as well.

Long term

These short-term speculations are however risky, and I would only consider long-term valuations when making stock market decisions.

But, in times like today, I think a look at what people are saying in the short term can help us. What I mean is the inverse times when many prices look upside down.

Then, when we see anything that seems to match our long-term assessments, we may have just found a hot stock to buy.

Decision

Now there are some cheap anomalies out there, I’m sure. But I don’t see Rolls-Royce as one of them.

I think it’s turning into a well-run company with potential growth years ahead. My only worry is that if these short-term gains are anything to go by, market sentiment could turn sour.

If that happens, we may just have a cheap buying opportunity.


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