Rolls-Royce Holdings PLC (LSE:RR.) shares hit an all-time high last week but if the engine maker meets its top-end cash flow targets, Citigroup analysts suggest it could fly another 50% higher.
The FTSE 100-listed group’s 2027 free cash flow target of between £2.8 billion and £3.1 billion looks “much more credible” following results last week, the analysts wrote in a note.
At £3.1 billion by 2027, on compound annual growth of 5%, the targeted free cash flow could imply a current fair value of as high as 777p, analysts said.
However, if Rolls is nearer the bottom of its free cash flow target range this would equate to a widely different scenario for the shares, according to the bank: annual growth of 3% on free cash flow of £2.8 billion would reflect a current fair value of 468p, Citi said, versus the 503p high hit last week.
Citi's current share price target is 555p, a 19% premium to Friday’s close
Given Rolls-Royce’s near five-fold increase in value since chief executive Tufan Erginbilgic took charge early last year, gains would add to rapid growth in the shares seen recently.
Results from Rolls last week showed a 74% rise in underlying profit to £1.1 billion for the six months to June and the company guided to free cash of £2.1 billion to £2.2 billion for full-year 2024.
Citi said annual growth of 3% to 5% was a "reasonable range".