. Rolls-Royce (LSE: No other FTSE 100 The supplies are similar to the matching of 568% advance in five years.

Does every British engineering giant offer good value for recent investors with trade campaigns for 7.24 £ today? Has the optimism around the company has already been priced?

Here is my opinion.

Valuation indicators

To determine if the price of Rolls-Royce shares is still inexpensive, it is worth starting by looking at the widely used valuation indicators.

Let’s start with the price index to profit (P/E). Rolls-Royce shares are currently mentioned by P/E multiples around 24.4. P/E supporting are even more high-priced with a ratio of almost 31.

Compared to the average 16.3 multiple in the FTSE 100 wrestling, the manufacturer of jet engines seems high-priced. This is a risk for investors today. This suggests that the company’s financial results have little space for errors, and the future phrases of shareholders may not be as promising as in recent years.

The p/e-refrigeration factor (PEG) can provide further tips because this indicator takes into account the expected revenue improvements. Traditional investment wisdom decides that the PEG indicator below one is a good sign that the shares are potentially underestimated.

Unfortunately, the expected five-year PEG multiple for Rolls-Royce is almost 2.3. This is another signal that the herds were not the opportunity it was once. At least investors can soothe, because these numbers look more reasonable compared to the competitors of the American industry, such as Ge aerospace AND Honeywell InternationalEven if not against other Great Britain actions.

Paying bonuses

In general, it can be said that there is a risk of valuation related to the price of Rolls-Royce shares. But numerical formulas are not everything. The legendary investor Charlie Munger was skeptical of his usability. He considered investing both as art and science.

How is Rolls-Royce arranged on some key tests that Munger used to assess the true value of action?

First of all, the company needs a forceful competitive advantage and a wide economic moat. Here I think the company is triumphing. Rolls-Royce aircraft engines have long had high-quality reputation, reliability and performance.

In defense, the company is the preferred supplier of the UK government, as evidenced by a recent agreement worth 9 billion pounds granted to support the fleet of Royal Navy submarines. In addition, Rolls-Royce was a pioneer in developing a petite modular reactor technology that can be critical in providing energy with low carbon content.

Secondly, Munger attached great importance to the company’s management. Few would doubt the Rolls-Royce CEO of Tufana Eggilgiç. He took over what he described as “Burning Platform“He transformed the company into a highly profitable enterprise, restored the company’s credit assessment to investment assessment and resumed dividend payments.

Thirdly, financial force is also crucial. There is a lot to like on this front. The Rolls-Royce operating margin improved to 13.8% from 5.1% in 2022, free cash flow increased in the same period from 0.5 billion GBP to 2.4 billion GBP, and the return on capital increased from 4.9% to 13.8%.

Although the price of Rolls-Royce shares is probably not underestimated today, I think today’s level is a fair reflection of investment possibilities. In my opinion, this is a supply that still deserves consideration and I hope that Munger would agree if he were with us!