RE: BARGAIN6 Nov 2020 12:30
Is the current share price fair value?
A lot of investors are wondering whether the current price is a good one. I’ve been on the sidelines as well, waiting to invest at a price that makes sense. I last covered the stock a few weeks back, when the share price had shot up to 223p. I decided to wait then, which proved to be a good call. Apart from gut feelings, what metrics can I look at to try and put a fair price on Rolls-Royce?
I can’t viably use the price-to-earnings ratio or even earnings-per-share given that the firm is in a loss-making position, so have to look elsewhere. The market capitalisation of the firm stands at £5.94bn. The enterprise value is calculated at £5.93bn. This enterprise value is an alternative way to value a company, aside from the public listing value. In this case, values are similar, which indicates to me that the current share price at 71p fairly accurately prices the value of Rolls-Royce.