Rolls-Royce Holdings plc (RYCEY) Stock Analysis — Price Target, Buy Rating & DCF Valuation (2026)
RYCEY screens as moderate-quality and attractively valued — upside depends on execution maintaining above-consensus delivery.
RYCEY's grade is Buy, with moderate downside risk (CVaR -15.9%), and quality metrics (net margin 28%, ROE 6%). Rolls-Royce Holdings plc (RYCEY) trades at $15.26 with a valuation grade of Buy: a trailing P/E of 16.2x at a 26% discount to sector median, net margins of 27.5%, a DCF-implied intrinsic range of $12–$16 suggesting a -9% margin of safety, beta 1.20 (moderate risk profile).
DCF Valuation Range
Key Takeaways
- Valuation: Buy grade — P/E 16.2x — DCF range $12–$16 implies -9% margin of safety
- Risk: CVaR -15.9% (95th percentile, 1-month) indicates moderate tail exposure; beta of 1.20 amplifies broad market moves in both directions
- Strengths: Size 4.0/5, 28% net margin, 6% ROE dominate the factor profile
- Watch: Monitor earnings delivery — premium multiples leave limited margin for misses
Quantitative Factor Profile
Key Metrics
| Metric | Value |
|---|---|
| Current Price | $15.26 |
| P/E Ratio (TTM) | 16.2x |
| Forward P/E | 25.7x |
| P/S Ratio | 6.0 |
| EV/EBITDA | 28.8 |
| Beta | 1.20 |
| Net Margin | 27.5% |
| ROE | 6.2% |
| Debt/Equity | 158.4% |
| Dividend Yield | 0.81% |
| CVaR (95%, 1M) | -15.9% |
| Market Cap | $126.8B |
RYCEY screens as a fundamentally sound business, at an attractive entry point relative to intrinsic value. Recent earnings delivery has been inconsistent against consensus.
RYCEY trades at 16.2x trailing earnings — 26% below the Industrials sector median of 22.0x.
RYCEY is a Buy on the current read. The factor profile is constructive and the valuation is not stretched — a combination that tends to hold up reasonably well across market conditions. What I watch on this name is earnings consistency — specifically whether delivery against consensus is stable or deteriorating. That is usually where the rating gets confirmed or challenged before the price reflects it. The setup that would make me more positive is a quarter that confirms the operating leverage story. The setup that would make me cautious is any signal that consensus estimates are getting ahead of fundamentals.
Earnings Projections
| Quarter | EPS Est. | YoY EPS | Analysts |
|---|---|---|---|
| Q2 2026 | $0.15 | — | 2 |
| Q3 2026 | $0.15 | — | 2 |
| Q4 2026 | $0.15 | — | 2 |
| Q1 2027 | $0.15 | — | 2 |
Earnings Projections — Consensus EPS Estimates
RYCEY vs. Sector Peers
| Ticker | P/E (TTM) | Fwd P/E | Beta | CVaR-95 | Net Margin |
|---|---|---|---|---|---|
| RYCEY | 16.2x | 25.7x | 1.20 | -15.9% | 27.5% |
| BAESY | 26.8x | 18.8x | -0.06 | -14.8% | 7.3% |
| EADSY | 26.0x | 20.5x | 0.89 | -16.2% | 6.9% |
| RHM.DE | 50.2x | 20.4x | 0.42 | -22.9% | 7.2% |
| THLEF | 27.6x | 25.8x | 0.10 | -15.2% | 7.6% |
DCF Scenario Analysis
Hover each scenario for detail · current price $15.26Pairwise Correlation Matrix
Extended Analysis — Buy, Hold or Sell? Risk Factors. Portfolio Fit.
Is RYCEY a buy, hold, or sell?
RYCEY carries a valuation grade of Reduce. At a trailing P/E of 16.2, the stock trades at a 26% discount to the Industrials sector median of 22.0x. Our discounted cash flow model produces an intrinsic range of $12–$16 — implying a -9% margin of safety at the current price of $15.26. The width of the DCF range reflects genuine uncertainty in the terminal growth rate assumption: the correct framework is a probability-weighted distribution over scenarios, not a single point estimate. See the DCF valuation framework for full methodology.
Analyst estimate revisions are trending downward.
What are RYCEY's key risk factors?
With a beta of 1.20, RYCEY exhibits an above-market risk profile relative to the broad market. The 95th-percentile CVaR of -15.9% on a one-month horizon should inform position sizing directly: at a 10% portfolio weight, this tail event contributes approximately 1.6% of total portfolio loss in the worst 5% of months. Net margins of 27.5% are significantly above the Industrials sector average of 11%, reflecting durable pricing power. Leverage is moderate with debt-to-equity at 158%.
How does RYCEY fit in a diversified portfolio?
At typical HENRY portfolio weights — 10–20% of the equity allocation — RYCEY carries a beta of 1.20, meaning it amplifies broad market moves proportionally. The appropriate weight is not a function of conviction alone, but of the full covariance structure across all holdings. See the Ledoit-Wolf covariance framework for the methodology behind these calculations.
Among closely correlated names, RYCEY shows the strongest co-movement with EADSY (0.66), BAESY (0.55), RHM.DE (0.08). Investors seeking diversification should note these correlation dynamics when constructing multi-asset portfolios.
True portfolio risk is a function of the full covariance structure across all holdings — not individual stock metrics. The Portfolio Health Check quantifies this at the portfolio level: it surfaces hidden concentration, marginal CVaR contributions, and the degree to which your overall allocation deviates from an optimal risk-adjusted mandate. The RYCEY analysis here is a single node in that larger structure.
For the full transatlantic conviction hierarchy — including RYCEY's position sizing, conviction rating, and upside/risk case in the 2026 defence supercycle — see: Defence Spending 2026: The Transatlantic Allocation Case →
Investor FAQ
Is RYCEY a buy or sell in 2026?
Rolls-Royce Holdings plc (RYCEY) carries a Buy quantitative rating from A.L. Capital Advisory, derived from Discounted Cash Flow intrinsic value analysis, five-factor model scoring (Value, Quality, Momentum, Volatility, Size), and CVaR tail risk measurement. At $15.26, the DCF midpoint margin of safety is -9% (intrinsic value range: $12 bear – $16 bull). Composite factor score: 3.3/5. Strongest factor: Value (4.0/5). Weakest factor: Volatility (2.5/5). Trailing P/E: 16.2x. Rating by Anton Ladnyi, CFA Charterholder (ex-Goldman Sachs Equity Research, ex-J.P. Morgan Wealth Management), A.L. Capital Advisory, Berlin. Full methodology: Portfolio Construction Framework →
What is the average analyst target price for RYCEY?
Wall Street consensus target for RYCEY: $21.87 (+43.3% upside from the current price of $15.26). The analyst target range spans $20.50 (most bearish) to $23.24 (most bullish). Consensus recommendation: Buy. Note that analyst price targets typically reflect a 12-month forward horizon and are derived from a blend of DCF, comparable-company, and sum-of-the-parts analysis. A.L. Capital Advisory’s quantitative Buy rating is produced independently — from DCF intrinsic value, five-factor model scores, and CVaR tail risk — and does not mechanically track Street consensus. When the two diverge, the divergence itself is informative: it can reflect differences in time horizon, valuation methodology, or the degree to which the current price already discounts the consensus case. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Monte Carlo Simulation Framework →
How does RYCEY score on Value, Quality, Momentum, Volatility, and Size?
RYCEY five-factor scores (A.L. Capital Advisory, 1–5 scale): Value 4.0/5 (above average) — measures current price versus DCF intrinsic range and trailing earnings multiples; Quality 3.0/5 (neutral) — captures profitability metrics including return on equity, net margin (ROE: 623.5%) and net margin (27.5%); Momentum 3.0/5 (neutral) — reflects recent price trajectory and earnings surprise consistency; Volatility 2.5/5 (neutral) — inverse measure derived from beta, where lower historical volatility earns a higher score; Size 4.0/5 (above average) — market capitalisation rank (mega-cap $1T+ scores 5/5). Composite: 3.3/5. Factor scores above 4.0 signal a tailwind in that dimension; below 2.0 signals a material headwind. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Black-Litterman Model →
What is RYCEY's tail risk and CVaR?
The 95th-percentile Conditional Value at Risk (CVaR) for RYCEY on a one-month horizon is -15.9%. CVaR represents the expected average loss in the worst 5% of monthly outcomes — a more conservative tail risk measure than standard VaR, which only marks the loss threshold. Beta of 1.20 indicates above-market volatility with amplified drawdown exposure. For reference, a diversified S&P 500 ETF carries a one-month CVaR of roughly -8% to -12% in normal market conditions; individual equity CVaR is higher due to idiosyncratic risk. At the portfolio level, what matters is the marginal CVaR contribution of each holding — not its standalone figure. The A.L. Capital Advisory Portfolio Health Check quantifies each position's marginal tail-risk contribution across your entire holdings. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: CVaR & Tail-Risk Methodology →
What is RYCEY's intrinsic value and DCF price target?
A.L. Capital Advisory's DCF model produces an intrinsic value range of $12 (bear case) to $16 (bull case) for Rolls-Royce Holdings plc (RYCEY). At $15.26, the midpoint margin of safety is -9% (positive = discount to intrinsic mid; negative = premium). The bear-to-bull spread reflects genuine sensitivity to the two dominant DCF inputs: the terminal growth rate and WACC. Terminal value typically accounts for 60-80% of total intrinsic value in most equity DCF models, which is why a range is more analytically sound than a point estimate. The central analytical question is not what the DCF outputs as a single number but which growth trajectory the current market price already discounts. All DCF analysis follows CFA Institute standards and is conducted by Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: DCF Valuation Framework →
What would trigger a rating upgrade or downgrade for RYCEY?
Upgrade trigger: Upgrade to Strong Buy on evidence of accelerating earnings surprise magnitude combined with improvement in the Value factor score — specifically if the current 16.2x P/E is supported by an upward revision to DCF terminal growth assumptions. Downgrade trigger: a sustained reversal in the Quality and Momentum factor scores for two or more consecutive quarters. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Investment Policy Statement Framework →
How does RYCEY contribute to portfolio risk and diversification?
RYCEY carries a beta of 1.20 (high-volatility / growth-sensitive relative to the broad equity market). A beta above 1.0 means the position amplifies market moves in both directions at a typical portfolio weight. Strongest peer co-movement: EADSY (0.66), BAESY (0.55), RHM.DE (0.08). Holding RYCEY alongside these names in the same portfolio increases concentration risk. True portfolio risk is a function of the full covariance structure — a single stock's beta does not reveal its marginal contribution to portfolio tail loss. The A.L. Capital Advisory Portfolio Health Check quantifies concentration risk (Herfindahl-Hirschman Index), pairwise correlations, and marginal CVaR contribution across all your holdings. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Ledoit-Wolf Covariance Framework →
What quantitative methodology does A.L. Capital Advisory use to analyse RYCEY?
A.L. Capital Advisory analyses Rolls-Royce Holdings plc (RYCEY) using a four-component quantitative framework grounded in CFA Institute standards. (1) DCF Valuation: projects free cash flows under bear and bull assumptions, discounts at WACC to produce an intrinsic value range with margin-of-safety calculation. (2) Five-Factor Scoring: each equity is scored 1–5 on Value, Quality, Momentum, Volatility, and Size. (3) CVaR Tail Risk: 95th-percentile Conditional Value at Risk from historical simulation of daily returns on a one-month horizon. (4) Earnings Surprise Analysis: quarterly beat rate and magnitude are incorporated into the Momentum and Quality factor scores. The current Buy rating for RYCEY is the output of applying this complete framework to current data. All analysis is conducted personally by Anton Ladnyi, CFA Charterholder (ex-Goldman Sachs Equity Research, ex-J.P. Morgan Wealth Management), founder of A.L. Capital Advisory, Berlin. CFA Charter: https://credentials.cfainstitute.org/5ff4f4bf-f1e6-4ca7-9ab2-aaed50ec2e43 Full methodology: DCF Valuation Framework → · CVaR & Tail-Risk Methodology →
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This analysis is produced using a systematic quantitative framework applied to market data and does not constitute investment advice. Prose commentary is AI-assisted and generated from structured quantitative inputs. All data and metrics are as of 2026-05-15 and are point-in-time estimates subject to revision without notice. CVaR figures are based on historical simulation and do not guarantee future outcomes. DCF ranges and upgrade/downgrade triggers are forward-looking statements based on current assumptions and may not materialise. Past performance does not guarantee future results. This analysis does not account for individual circumstances, tax position, or investment objectives — consult a qualified financial advisor before making investment decisions. This content is intended for informational purposes only and does not constitute regulated investment advice under MiFID II or FCA guidelines. This content is not intended for US persons or residents of jurisdictions where its distribution would be contrary to local law or regulation. This service is not directed at residents of Finland, Sweden, Norway, Denmark, Iceland, or Poland. The author may hold long or short positions in securities mentioned in this analysis. Nothing on this page represents a solicitation to buy or sell any security. A.L. Capital Advisory is an independent private advisory practice and is not affiliated with Rolls-Royce Holdings plc.
