Rolls-Royce (RYCEY) AI Stock Analysis

• Market Cap: $140.15B
• Dividend Yield: 0.87%
• Average Volume (3M): 474.74K
• Price to Earnings (P/E): 18.8
• Beta (1Y): 0.92
• Revenue Growth: 12.65%
• EPS Growth: 153.93%
• Country: US
• Employees: 42,400
• Sector: Industrials
• Sector Strength: 72
• Industry: Aerospace & Defense
• EPS (TTM): 0.21
• Shares Outstanding: 8,435,051,000
• 10 Day Avg. Volume: 494,414
• 30 Day Avg. Volume: 474,744
• PEG Ratio: 5.48
• Price to Book (P/B): -52.26
• Price to Sales (P/S): 2.52
• P/FCF Ratio: 16.46
• Enterprise Value/Market Cap: 0.70
• Enterprise Value/Revenue: 5.04
• Enterprise Value/Gross Profit: 20.50
• Enterprise Value/Ebitda: 32.93
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 0.44
• Revenue Forecast (FY): $28.91B

• Rating: 63 Neutral
• Price Target: $18.00 ▲(3.81% Upside)

Rolls-Royce's overall stock score is driven by a positive earnings call and fair valuation, despite technical weaknesses and balance sheet concerns. The company's financial recovery and strategic initiatives are promising, but ongoing supply chain and customer relationship challenges need attention.

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

Rolls-Royce shows a strong recovery in income and cash flow metrics, with a robust revenue growth rate and improved operational efficiency. However, the balance sheet remains a significant weakness due to negative equity and high liabilities, posing potential risks.

Income Statement

Rolls-Royce has shown a strong recovery in its income statement metrics over recent years. The gross profit margin stands at 22.32%, with a notable improvement in net profit margin to 13.34% in the latest year. Revenue growth rate is robust at 14.68%, indicating a positive trajectory. The EBIT margin of 15.37% and EBITDA margin of 18.42% demonstrate improved operational efficiency. However, the company has faced volatility in net income in previous years, which remains a potential risk.

Balance Sheet

The balance sheet of Rolls-Royce reveals significant challenges, with a negative stockholders' equity indicating financial instability. The debt-to-equity ratio is not meaningful due to negative equity, posing a risk of high leverage. Although total assets have increased, the equity ratio is negative, underlining the company’s reliance on liabilities. Despite improvements in liquidity, the balance sheet stability remains a concern.

Cash Flow

Rolls-Royce's cash flow statement shows encouraging trends with a substantial free cash flow growth rate of 63.36%. The operating cash flow to net income ratio is 1.5, indicating strong cash generation relative to earnings. However, the free cash flow to net income ratio of 1.15 suggests a need for careful capital expenditure management. The positive cash flow trajectory is a strength, but historical cash flow volatility poses a risk.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	19.54B	18.91B	16.49B	13.52B	11.22B	11.49B
Gross Profit	4.80B	4.22B	3.62B	2.76B	2.14B	1.11B
EBITDA	2.99B	3.48B	3.74B	1.25B	996.00M	222.00M
Net Income	5.79B	2.52B	2.41B	-1.27B	120.00M	-3.17B
Balance Sheet
Total Assets	37.94B	35.69B	31.51B	29.45B	28.67B	29.52B
Cash, Cash Equivalents and Short-Term Investments	6.06B	5.36B	3.52B	2.40B	2.55B	3.49B
Total Debt	4.91B	5.13B	5.76B	5.96B	7.78B	7.33B
Total Liabilities	35.51B	36.57B	35.14B	35.47B	33.31B	34.39B
Stockholders Equity	2.41B	-912.00M	-3.68B	-6.05B	-4.66B	-4.90B
Cash Flow
Free Cash Flow	3.18B	2.90B	1.77B	1.25B	-818.00M	-3.96B
Operating Cash Flow	4.13B	3.78B	2.48B	1.85B	-259.00M	-3.01B
Investing Cash Flow	-950.00M	-831.00M	-726.00M	826.00M	-428.00M	-1.01B
Financing Cash Flow	-1.36B	-1.05B	-549.00M	-2.87B	-88.00M	3.02B

Rolls-Royce Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 17.34
• 50DMA: Positive
• 100DMA: Positive
• 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 Neutral. The current price of 17.34 is above the 20-day moving average (MA) of 16.89, above the 50-day MA of 15.53, and above the 200-day MA of 13.87, indicating a neutral trend. The MACD of 0.33 indicates Positive momentum. The RSI at 51.02 is Neutral, neither overbought nor oversold. The STOCH value of 19.95 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for RYCEY.

Rolls-Royce Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NOC	75 Outperform	$97.80B	23.70	26.17%	1.55%	-0.14%	72.35%
RTX	75 Outperform	$267.43B	40.21	10.74%	1.44%	8.79%	39.63%
LMT	74 Outperform	$138.21B	27.79	76.87%	2.77%	2.88%	-35.15%
GE	70 Outperform	$308.51B	35.93	45.24%	0.48%	-19.21%	31.83%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
RYCEY	63 Neutral	$140.15B	18.77	3725.44%	0.87%	12.65%	153.93%
BA	56 Neutral	$191.51B	127.34	289.13%	―	10.19%	-6.03%