Rolls-Royce (RYCEY) AI Stock Analysis

• Market Cap: $151.17B
• Dividend Yield: 0.87%
• Average Volume (3M): 681.79K
• Price to Earnings (P/E): 19.6
• Beta (1Y): 0.89
• 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: 8,426,904,000
• 10 Day Avg. Volume: 493,414
• 30 Day Avg. Volume: 681,792
• 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: 0.72
• Enterprise Value/Revenue: 5.18
• Enterprise Value/Gross Profit: 18.63
• Enterprise Value/Ebitda: 19.26
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 0.45
• Revenue Forecast (FY): $29.26B

• Rating: 79 Outperform
• Price Target: $20.50 ▲(18.22% 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

Improved profitability

A 50% rise in operating profit to GBP 1.7bn signals durable improvement in core operations and margin recovery. Higher operating profit strengthens internal funding for R&D, capital projects and service expansion, reducing reliance on external financing over the next months.

Strong cash generation

Substantial FCF growth and an operating cash flow to net income ratio of 1.5 indicate robust cash conversion. This durable cash generation improves the firm's ability to fund capex, service debt, progress strategic projects (SMRs, digital), and sustain buybacks/dividends.

Diversified segment strength & backlog

Very strong gains in Power Systems and a record GBP 18.8bn defence backlog provide multi-year revenue visibility. Diversification across civil aftermarket, power and defence reduces cyclicality, supports stable service revenues and underpins long-term margin resilience.

Negative Factors

Weak balance sheet / negative equity

Negative shareholders' equity is a structural weakness that distorts leverage metrics and raises solvency concerns. It limits financial flexibility, increases refinancing and covenant risks, and could constrain strategic investments or M&A over the coming months.

Supply chain constraints and cost inflation

Persistent supply chain issues and resulting cost inflation pressure margins and delivery timelines. These are structural in nature for aerospace and can require sustained capex, supplier investment or price concessions, reducing margin upside and operational predictability.

Customer relationship / reliability concerns

Customer dissatisfaction tied to engine time-on-wing undermines aftermarket trust and service revenues. Reliability issues can prompt contract renegotiations, compensation or lost aftermarket volumes, weakening a key durable revenue stream and competitive positioning.

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 generates revenue through several key streams, primarily in the civil aerospace and defense sectors. In civil aerospace, the company earns money by manufacturing and servicing aircraft engines for commercial airlines and business jets, with a significant portion of revenue coming from long-term service agreements and aftermarket support. In the defense sector, Rolls-Royce provides engines and power systems for military aircraft, naval vessels, and other defense applications, benefiting from government contracts and partnerships. Additionally, the power systems segment supplies engines and propulsion solutions for marine and industrial applications. The company also engages in joint ventures and partnerships that enhance its technological capabilities and market reach, contributing further to its earnings. The focus on innovation and sustainability, alongside a strong portfolio of service agreements, plays a crucial role in Rolls-Royce’s revenue generation strategy.

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	5.34B	5.13B	5.76B	5.96B	7.78B
Total Liabilities	35.08B	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: Positive
• Last Price: 17.34
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RYCEY, the sentiment is Positive. The current price of 17.34 is above the 20-day moving average (MA) of 17.32, above the 50-day MA of 16.76, and above the 200-day MA of 14.61, indicating a bullish trend. The MACD of 0.38 indicates Negative momentum. The RSI at 59.31 is Neutral, neither overbought nor oversold. The STOCH value of 77.11 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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	$151.17B	19.60	604.85%	0.87%	12.65%	153.93%
NOC	77 Outperform	$102.81B	24.91	26.17%	1.55%	-0.14%	72.35%
RTX	75 Outperform	$271.97B	40.83	10.74%	1.44%	8.79%	39.63%
LMT	74 Outperform	$151.41B	30.63	76.87%	2.77%	2.88%	-35.15%
GE	70 Outperform	$358.97B	42.09	45.24%	0.48%	-19.21%	31.83%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
BA	56 Neutral	$178.69B	120.01	289.00%	―	10.19%	-6.03%