Although Rolls-Royce stock has returned -60% over the past three years, the stock has more than doubled from its October 2020 low in less than five months, indicating that the post-pandemic market recovery favors it. For this reason, we have created this guide for those who want to trade Rolls-Royce stock. The guide includes the history and profile of Rolls-Royce, its business model, and its sources of revenue.
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Learn How to Buy Rolls-Royce Stocks in 3 Easy Steps
Find a broker
Search for brokers with access to the London Stock Exchange as these are the ones that can give you access to the Rolls-Royce stock. Once you have done this, you can trim down your list based on other factors, such as platform, security, trading fees, and user experience.
Analyze the Rolls-Royce stock price chart
A poorly timed trade not only reduces your profit potential but also may lead to avoidable losses. Never hit the buy button without taking the time to analyze the stock chart with the aid of various technical indicators to finetune your strategy.
You can trade Rolls-Royce stock at the market price or by setting a price limit. The former allows you to purchase the stock at the current market price, while the latter will enable you to purchase the stock at your desired price level.
Rolls-Royce company overview
Rolls-Royce is an engineering company that started as a car company before evolving into an aero-engine manufacturing business. The company remains committed to world-class power and propulsion systems and regularly provides maintenance, repair, and overhaul services of engines for companies in the aviation, industrial, and defense sectors, in addition to its manufacturing business. Rolls-Royce is also involved in artificial intelligence, data analytics, and nuclear energy.
The company operates four business segments: Civil Aerospace, Power Systems, Defence, and ITP Aero. The Civil Aerospace segment designs, manufactures, sells engines for large commercial aircraft and aviation companies, and provides aftermarket services. The Power Systems segment focuses on producing high and medium-speed reciprocating engines and power generation systems for the marine, defense, and industrial markets. The Defense segment focuses on the production of aero engines for the military. This includes manufacturing aircraft applications, naval engines, submarine nuclear power plants, and aftermarket services. The ITP Aero segment designs, develops, and manufactures aeronautical engines and gas turbines. It also provides maintenance, repair, and overhaul services.
Rolls-Royce Holdings plc was founded in 1884 and is headquartered in London, the United Kingdom. The company was listed on the London Stock Exchange in 1987, and it has a market capitalization of $9.7bn.
Rolls-Royce business model and revenue streams
Perhaps one of the best-known examples of an innovative business model can be found in Rolls-Royce. The company’s "power-by-the-hour" business model at the core of its Civil Aerospace segment has changed how aviation companies value engines and offset many operational costs for both company and clients.
The new business model does not sell engines but charges airlines for the amount of time they use the engines. Rolls-Royce generates constant revenue by invoicing flying hours, thereby reducing costs through an efficient service concept.
As such, airlines are no longer required to pay outrightly for the engine; instead, they pay for the engines' operating hours. In effect, the engine remains the property of Rolls-Royce, which also provides maintenance and repairs. With this innovation, Rolls-Royce has created advantages for itself and its customers and made it possible for low-cost airlines, such as Southwest Airlines, to reduce their cost of operations. It has also ensured that Rolls-Royce staff are still gainfully employed, an enviable feat in an industry known for its huge lay-offs. This segment accounts for 49% of the company's revenue.
The second-highest revenue stream is generated from its power system segment, which accounts for 23% of overall revenue. The rise in global clean energy demand, which highlights the need for eco- and climate-friendly power generation, has boosted this segment's financial performance, leading to its astronomical rise in 2019.
Other revenue streams for Rolls-Royce include defense contracts and partnership with the military, which is handled by its defense segment. This segment accounts for 20 percent of the company's revenue. Rolls-Royce is the second largest provider of defense aero-engine products, servicing 160 customers in over 100 countries. The defense segment accounts for 11% of the company’s revenue. Rolls-Royce is invested in oil and gas, as well as nuclear and renewable energy. The company supplies gas turbines and diesel engines for power generation and is developing a strong capability in the civil nuclear power market.
History of Rolls-Royce
Rolls-Royce's origins can be traced to 1884 when Henry Royce started his electrical and mechanized business. Royce developed his first car in 1904 after he met Charles Rolls and a talented engineer who built engines. Impressed with each other’s ideas, the two men formed a new motor car company called Rolls-Royce.
The partnership was officially formalized in 1906 following the first car's success, the six-cylinder Silver Ghost, dubbed the best car in the world. In 1914, Rolls-Royce began developing aeronautic engines for British fighter jets during the first world war. The company developed half of the total horsepower used by the allies during the war. In 1940, at the outbreak of the second world war, Rolls-Royce was called into action to build engines for fighter jets. The company built Merlin, which was used to power Hawker Hurricane and Supermarine Spitfire jets. The success of Merlin transformed the company from a relatively small business to an engineering powerhouse.
In 1944, Rolls-Royce began developing the aero gas turbine, and in 1953, the company entered the civil aviation space. Ten years later, the company consolidated its position by acquiring smaller British aero-engine manufacturers. By 1970, Rolls-Royce had a workforce of 70,000 people.
However, Rolls-Royce experienced a bump in 1971 when it fell into financial problems due to its new RB211 turbofan engine, which was designed and developed for Lockheed Aircraft Corporation's new L-1011 TriStar led. After several government-provided cash subsidies, Rolls-Royce entered into receivership and was placed in liquidation later that year. In 1973, the company was privatized, and it subsequently launched Rolls-Royce Motors that same year.
The 1990s marked the start of a new chapter in the firm's history. BMW attempted to purchase the carmaker, but their offer of £340 million was outbid by Volkswagen’s £430 million.
In 2002, Rolls-Royce and Bentley separated due to a special deal between a Volkswagen And BMW which saw Bentleys being produced by Volkswagen and Rolls-Royces by BMW.
Rolls-Royce made a mark in the 21st century with its eagerly anticipated Phantom. This was followed up by the Phantom Extended Wheelbase, the Drophead Coupe, Phantom II, and Phantom Coupe over nine years.
Brokers that offer Rolls-Royce shares
There is a long catalog of brokers that offer shares of Rolls-Royce in the UK. However, to help you in that regard, we have compiled a list of the best brokers offering Rolls-Royce shares in the table below.
Should I invest in Rolls-Royce stock?
Rolls-Royce was severely affected by the pandemic, which led it to shut down operations. As the economy opens up and people begin to travel again, the company can see an uptick in revenue. It would take some time before the company can get back to pre-pandemic levels. However, it is a worthwhile stock for a long-term investment.
Rolls-Royce stock investment potential
Rolls-Royce wasn't in good financial condition before the pandemic. So, when the pandemic came, the company was brought down to its knees. However, despite this, the company has shown resilience and innovation.
Rolls-Royce is involved in an electric aircraft startup, Archer, which could go public at a potential billion-dollar valuation. Morgan Stanley forecasts a $1.5trn valuation for the electric air mobility market by 2040. Of course, the stock could be perceived as green, making it amiable to retail investors looking for exposure to green stocks. Hence, Rolls-Royce is primely positioned to profit from long-term market trends.
What kinds of investors should include Rolls-Royce stock in their portfolios?
Rolls-Royce would appeal to long-term investors due to a variety of reasons. First, the airline sector has not reached its optimum as many carriers are still flying below capacity. Industry watchers believe that the industry would get back to pre-pandemic levels by 2022. Also, due to many airline companies' huge debt, it is expected that the size of airlines in the world would shrink through mergers and acquisitions. These factors would affect Rolls-Royce's profitability, and as such, the stock might experience a sluggish price action for quite some time.
How much should I invest in Rolls-Royce?
There's no minimum amount of money needed to start investing in stocks. It depends on your financial capability, experience, age, and investment time frame. You probably need at least $200 — $1,000 to get started, though most brokerages have no minimums to open an account.
How to buy shares in Rolls-Royce stock?
Here are the steps you may take to start buying shares in Rolls-Royce:
Compare trading platforms: If you're a beginner, look for a platform with low commissions, expert ratings, and investment tools to track your portfolio. Above all, it must have access to the LSE.
Open and fund your brokerage account: You will need to open a brokerage account with your preferred trading platform. You would be required to complete an application and fund your account via a bank transfer, credit card, or debit card.
Search for Rolls-Royce ticker: Now, you search for the stock by name or ticker symbol (RYCEY) on the broker’s platform. You will see some information about the stock, which may help you to decide whether to buy at that moment.
Place your trade: After doing your analysis, you can decide to place a trade. You can trade Rolls-Royce shares at the market price or with a trade limit. To spread out your purchase, look into dollar-cost averaging, which allows you to lower your average buying price.
Buy Rolls-Royce shares using a broker
You can buy Rolls-Royce shares from a variety of brokers, but the process is somewhat similar. Log into your trading account, search for Rolls-Royce using the appropriate ticker (RR.L). Click on the stock and place your trade. If you prefer to buy at market price, you can place a buy market order, but if you prefer price limit orders, you can set your limit buy level. Once the market price hits the level, your order would be executed.
Buy Rolls-Royce shares with a direct stock purchase plan (DSPP)
DSPP requires an investor to engage with a company directly rather than through a broker, but Rolls-Royce does not seem to offer a DSPP for its shares.
Frequently Asked Questions
Being involved in the airline and transportation business, the company stands to benefit from the post-pandemic market recovery.
Yes, the company has a profitable business model.
Yes, you can.
There is no best platform to trade Rolls-Royce stock.
Shares of Rolls-Royce are traded between 8 am and 4 pm London Time.
London stock exchange