Rolls-Royce (LON: RR) share price has wavered recently as investors assess the next action. This wavering has been going on after the stock surged to 400p, its highest point since February 14th. It has surged by almost 1,000% from its lowest point during the pandemic. Also, it has risen in the past five straight months.
Rolls Royce valuation concernsRolls-Royce is not the only industrial giant that is in a strong uptrend. As I wrote recently, Safran, a big French industrial giant has also soared in the past few years. Similarly, in the United States, General Electric has gone through a rebirth as it soared hard.
Other industrial companies are in a strong uptrend. For example, Caterpillar’s stock price has skyrocketed to its all-time high of $350. Emerson Electric has surged to an all-time high of $111 while Illinois Tool Works is sitting at a record high.
As I have written before, Rolls-Royce Holdings stock is thriving because of both macro and micro reasons. From a macro level, the company is seeing unprecedented demand as the civil aviation and defence rise.
Internally, the company has stayed for a long period without any major engine issues. It also has a new slate of top management that is focuses on boosting efficiency and increasing its profitability by cutting costs.
Therefore, the question among many investors is whether the company is currently overvalued and whether it has more upside. As I will explain below, technically, it has more upside based on trend and oscillator indicators.
Analysts are also bullish about the company. In recent weeks, analysts at Deutsche Bank and Odd BHF have increased their target for the stock. Oddo analysts believe that the Rolls-Royce share price will rise to 465p.
Deutsche Bank and JPMorgan analysts expect that it will soar to over 450p in the coming years. The only bears are from Berenberg.
Meanwhile, a Discounted Cash Flow (DCF) calculation by Simply Wall St places the value of the stock at 976p, signalling that it is about 60% undervalued.
Rolls-Royce Holdings also has a low PE multiple. It has a trailing PE ratio of 13.5, which is much lower than that of its peer companies. However, it is a bit overvalued when you consider the forward multiple.
Rolls-Royce share price forecast
Rolls Royce stock price has supportive technicals. On the weekly chart, we see that the stock has remained constantly above the 50-week and 100-week Exponential Moving Averages (EMA).
The stock recently crossed the crucial resistance point at 380.2p recently. This was an important level since it was its highest swing in June 2018. Oscillators like the Relative Strength Index (RSI) and the MACD have all pointed upwards.
Therefore, the stock will likely continue soaring as bulls target the key resistance at 443p, its highest level in 2013.
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