Rolls-Royce (RYCEY) AI Stock Analysis

• Market Cap: $130.25B
• Dividend Yield: 0.87%
• Average Volume (3M): 652.88K
• Price to Earnings (P/E): 17.2
• Beta (1Y): 0.95
• Revenue Growth: 12.65%
• EPS Growth: 153.93%
• Country: US
• Employees: 42,400
• Sector: Industrials
• Sector Strength: 72
• Industry: Aerospace & Defense
• EPS (TTM): 0.19
• Shares Outstanding: 8,410,270,500
• 10 Day Avg. Volume: 0
• 30 Day Avg. Volume: 652,879
• PEG Ratio: 0.14
• Price to Book (P/B): 36.06
• Price to Sales (P/S): 4.73
• P/FCF Ratio: 26.65
• Enterprise Value/Market Cap: 0.73
• Enterprise Value/Revenue: 4.49
• Enterprise Value/Gross Profit: 16.14
• Enterprise Value/Ebitda: 16.68
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 0.48
• Revenue Forecast (FY): $29.96B

• Rating: 79 Outperform
• Price Target: $17.50 ▲(0.92% Upside)
• Action: Upgraded Date: 03/01/26
• Date: Action: Upgraded 03/01/26

The score is driven by the company’s strong fundamental recovery (profitability and improving cash generation) and a bullish earnings call featuring upgraded guidance and shareholder-return actions. Technicals also support the trend, while valuation is only moderate and balance-sheet leverage remains the primary risk.

Positive Factors

Recurring aftermarket revenue

Rolls‑Royce’s business model leans on long-lived engine fleets and power-by-the-hour contracts, creating durable, recurring service income. That installed-base aftermarket stream cushions cycle volatility, supports higher lifetime margins and predictable multi-year cash flows for investment and servicing obligations.

Multi-year profitability turnaround

The company delivered a structural recovery: sustained revenue growth and a step-change in margins indicate improved pricing, cost control and program execution. Restored operating leverage increases resilience and funds strategic initiatives, making earnings power materially stronger over the next several quarters.

Improving cash generation

Rising operating and free cash flow strengthens financial flexibility, enabling debt reduction, the GBP1bn buyback and dividends while funding SMR and digital investments. Consistent FCF that tracks earnings closely improves balance sheet repair prospects and supports durable capital allocation choices.

Negative Factors

High leverage

Material leverage constrains strategic optionality and raises refinancing and interest-rate sensitivity. Even with positive equity restored, a ~2x debt/equity ratio leaves limited buffer if earnings weaken, increasing the probability that cash must be prioritized for debt service rather than growth or R&D over the medium term.

Cyclicality from flying hours

A key revenue driver is aircraft utilization, so aftermarket volumes and service margins are exposed to airline demand cycles and macro shocks. This structural sensitivity can quickly reverse recent margin gains and cash generation, making near- to mid-term earnings durability contingent on recovery staying intact.

Operational & supply-chain risks

Persistent parts constraints raise product costs and limit parts availability, eroding service quality and margins. Customer complaints (Trent 1000 time-on-wing) risk aftermarket relationship strain and higher remediation costs, which can impair recurring revenue and damage long-term service franchise value.

Rolls-Royce Business Overview & Revenue Model

Company Description

Rolls-Royce Holdings plc operates as an industrial technology company in the United Kingdom and internationally. The company operates in four segments: Civil Aerospace, Power Systems, Defence, and New Markets. The Civil Aerospace segment develops, manufactures, and sells aero engines for large commercial aircraft, regional jet, and business aviation markets, as well as provides aftermarket services. The Power Systems segment engages in the development, manufacture, marketing, and sale of integrated solutions for onsite power and propulsion for the marine, defense, power generation, and industrial markets. The Defence segment offers aero engines for military transport and patrol aircraft applications; and naval engines and submarine nuclear power plants, as well as aftermarket services. The New Markets segment develops, manufactures, and sells small modular reactor and new electrical power solutions. It also provides maintenance, repair, and overhaul services. Rolls-Royce Holdings plc was founded in 1884 and is headquartered in London, the United Kingdom.

How the Company Makes Money

Rolls-Royce primarily makes money through a mix of original equipment sales and long-term, service-driven aftermarket revenue across its end markets. 1) Civil Aerospace (commercial aero engines) - Engine sales: Revenue from selling large civil aero engines to aircraft/airframe manufacturers and airlines/lessors. - Aftermarket services (major earnings driver in the installed base): Recurring revenue from maintenance, repair and overhaul (MRO), spare parts, engine overhauls, and technical support over an engine’s multi-decade life. - Long-term service agreements: Many engines are supported under “power-by-the-hour”-style arrangements where customers pay based on engine utilization (e.g., hours flown), shifting revenue toward recurring service income tied to aircraft flight activity and shop-visit volumes. 2) Defence - Military propulsion and systems: Revenue from supplying engines and propulsion systems for military aircraft and related platforms. - In-service support: Ongoing maintenance, spares, upgrades, and availability/support contracts with government customers; these can be long-duration and provide recurring revenue alongside initial equipment deliveries. 3) Power Systems - Product sales: Revenue from selling mtu-branded high-speed and medium-speed engines and complete power systems used in marine, industrial, and power generation applications. - Service and parts: Aftermarket revenue from maintenance contracts, spares, overhauls, and lifecycle support for installed equipment. 4) Other earnings factors - Contract mix and utilization: In Civil Aerospace, flying hours and airline fleet utilization strongly influence service revenue; in Defence and Power Systems, government budget cycles, program schedules, and industrial demand affect deliveries and service activity. - Financing/other income: If present, items such as licensing, technology services, or other non-core income are not specified here; null.

Rolls-Royce Financial Statement Overview

Summary

Strong turnaround with clear revenue growth and a sharp improvement in profitability, supported by rising operating cash flow and free cash flow. The main constraint is balance-sheet risk: leverage remains meaningful despite the return to positive equity.

Income Statement

The income statement shows a strong multi-year turnaround and clear momentum. Revenue rose from ~$11.5B (2020) to ~$20.7B (2025), with 2025 growth of ~6%. Profitability expanded sharply: net margin improved from deeply negative in 2020–2022 to ~28% in 2025, alongside a much higher operating margin. Strengths are the scale-up in revenue and a step-change in earnings power; the key watch-out is that recent profitability is exceptionally high versus prior years, which can be sensitive to cycle, pricing, and program mix in aerospace.

Balance Sheet

Balance sheet quality improved materially in 2025, highlighted by a return to positive equity (~$2.7B) after multiple years of negative equity. However, leverage remains meaningful: total debt is ~$5.3B and debt is still high relative to equity (about 2.0x in 2025). Total assets are sizeable (~$38.0B), and the sharp improvement in equity reduces financial stress versus 2021–2024, but the capital structure still carries risk if earnings weaken or working-capital needs rise.

Cash Flow

Cash generation is solid and improving. Operating cash flow increased from ~$2.5B (2023) to ~$4.3B (2025), and free cash flow rose to ~$3.7B in 2025 with strong growth (~16%). Free cash flow tracked earnings reasonably well in 2025 (about 86% of net income), supporting earnings quality. The main weakness is that cash flow remains a smaller share of revenue (operating cash flow around the low-20% range of revenue in recent years) and the business has a history of negative cash flow in 2020–2021, indicating potential cyclicality.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	20.74B	18.91B	16.49B	13.52B	11.22B
Gross Profit	5.79B	4.22B	3.62B	2.76B	2.14B
EBITDA	6.01B	3.48B	3.74B	1.25B	996.00M
Net Income	5.71B	2.52B	2.41B	-1.27B	120.00M
Balance Sheet
Total Assets	38.05B	35.69B	31.51B	29.45B	28.67B
Cash, Cash Equivalents and Short-Term Investments	6.51B	5.36B	3.52B	2.40B	2.55B
Total Debt	4.27B	5.13B	5.76B	5.96B	7.78B
Total Liabilities	35.36B	36.57B	35.14B	35.47B	33.31B
Stockholders Equity	2.72B	-912.00M	-3.68B	-6.05B	-4.66B
Cash Flow
Free Cash Flow	3.68B	2.90B	1.77B	1.25B	-818.00M
Operating Cash Flow	4.29B	3.78B	2.48B	1.85B	-259.00M
Investing Cash Flow	-885.17M	-831.00M	-726.00M	826.00M	-428.00M
Financing Cash Flow	-2.77B	-1.05B	-549.00M	-2.87B	-88.00M

Rolls-Royce Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 17.34
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RYCEY, the sentiment is Negative. The current price of 17.34 is above the 20-day moving average (MA) of 17.16, above the 50-day MA of 17.12, and above the 200-day MA of 15.04, indicating a neutral trend. The MACD of -0.31 indicates Positive momentum. The RSI at 36.91 is Neutral, neither overbought nor oversold. The STOCH value of 13.50 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RYCEY.

Rolls-Royce Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RYCEY	79 Outperform	$130.25B	17.17	227.54%	0.87%	12.65%	153.93%
NOC	77 Outperform	$100.33B	19.57	26.50%	1.55%	-0.14%	72.35%
RTX	75 Outperform	$265.99B	36.54	10.62%	1.44%	8.79%	39.63%
LMT	74 Outperform	$144.36B	22.26	80.53%	2.77%	2.88%	-35.15%
GE	70 Outperform	$300.79B	37.76	45.88%	0.48%	-19.21%	31.83%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
BA	56 Neutral	$153.24B	74.05	-94.94%	―	10.19%	-6.03%