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Rating Change Detail - ROLLS-ROYCE HOLDING PLC (ADR) (RYCEY) - 2/22/2013
The stock was upgraded from No Interest to Strong Interest on 2/22/2013 by the P/E/Growth Investor Strategy based on the principles of Peter Lynch. The score according to this strategy rose from 0% to 93%. A full detailed analysis of RYCEY using this strategy is included below. For a full detailed analysis of RYCEY using 12 proven strategies of Wall Street Legends, take a free trial to Validea.com

Detailed Analysis of ROLLS-ROYCE HOLDING PLC (ADR) (RYCEY)

Strategy: P/E/Growth Investor - Based on: Peter Lynch

DETERMINE THE CLASSIFICATION:

RYCEY is considered a "True Stalwart", according to this methodology, as its earnings growth of 15.39% lies within a moderate 10%-19% range and its annual sales of $18,549 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. RYCEY is attractive if RYCEY can hold its own during a recession.

INVENTORY TO SALES: [PASS]

When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for RYCEY was 23.02% last year, while for this year it is 22.42%. Since inventory to sales has decreased from last year by -0.61%, RYCEY passes this test.

YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: [PASS]

The Yield-adjusted P/E/G ratio for RYCEY (0.47), based on the average of the 3 and 5 year historical eps growth rates, is excellent.

EARNINGS PER SHARE: [PASS]

The EPS for a stalwart company must be positive. RYCEY's EPS ($9.27) would satisfy this criterion.

TOTAL DEBT/EQUITY RATIO: [PASS]

This methodology would consider the Debt/Equity ratio for RYCEY (22.72%) to be acceptable (equity is three to ten times debt). This ratio is one quick way to determine the financial strength of the company.

FREE CASH FLOW: [NEUTRAL]

The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for RYCEY (2.96%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.

NET CASH POSITION: [NEUTRAL]

Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for RYCEY (14.14%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.

For a full detailed analysis of RYCEY using 12 proven strategies of Wall Street Legends,
take a free trial to Validea.com

Rating Change Detail - ROLLS-ROYCE HOLDING PLC (ADR) (RYCEY) - 2/22/2013

Detailed Analysis of ROLLS-ROYCE HOLDING PLC (ADR) (RYCEY)

Strategy: P/E/Growth Investor - Based on: Peter Lynch