Rolls-Royce shares offer 'significant long-term value', says Citi.
Shares of engine maker Rolls-Royce offer "significant long-term value", Citi said on Tuesday.
Source: Sharecast
The bank, which rates the stock at ‘buy’, said: "We do not know when the wide body market will recover, but we do believe it will.
"When it does, we expect Rolls-Royce to recover faster (as it has more new deliveries adding to the fleet and fewer old aircraft being retired)."
It added: "In our view, the often-cited £750m free cash flow (10% yield) as ‘early as 2022’ is not a sufficient reason to buy the stock, but the £1.5bn+ FCF in the longer term (20%+ FCF yield) is."
The bank said cash flow could be stronger than expected in the medium term as working capital is driven out, but it regards this as "a very nice one-off benefit" which should be valued accordingly.
Halifax is not responsible for the content and accuracy of the Markets News articles. We may not share the views of the author. Understand the risks, please remember the value of your investment can go down as well as up and you may not get back the full amount you invest. We don't provide advice so if you are in any doubt about buying and selling shares or making your own investment decisions we recommend you seek advice from a suitably qualified Financial Advisor. Past performance is not a guide to future performance.