Are Rolls-Royce shares “abnormally cheap”? Recent figures suggest that the answer to this question is an emphatic “yes”. The British aviation and marine engineering company’s stock price has been depressed, with the share price recently hitting a low of 6.30 pounds, a nearly 10-year low.
Yet analysts have suggested that the company’s shares are currently undervalued. According to a report from JPMorgan, the company’s stock is trading at a substantial discount, with a P/E ratio of 7.7, compared to the industrial sector average of 11. The report concludes that the company’s shares are “abnormally cheap”, citing its strong fundamentals and substantial cash flow.
Furthermore, analysts at Barclays have argued that the company’s stock is currently undervalued, noting that its current valuation does not reflect the company’s long-term growth prospects. The analysis suggests that the company’s stock is trading at a discount of around 35%, which is significantly lower than the sector average.
The company’s recent financial performance has been strong, with the company recording a 7% increase in profits in the first quarter of 2019. In addition, the company’s balance sheet remains healthy, with a strong free cash flow and a debt-to-equity ratio of 0.2.
In conclusion, it appears that Rolls-Royce shares are indeed “abnormally cheap”. With strong fundamentals and a substantial discount to the sector average, Rolls-Royce shares appear to offer an attractive opportunity for investors. As such, investors should consider taking a closer look at the company’s stock.