Untold amounts have been wiped off global markets this year. And while the FTSE 100 and S&P 500 have made small recoveries in the last month or so, investors will still be anxiously waiting to see what else 2022 can throw their way. With these falls, I’m on the lookout for beatdown stocks that I can buy for a bargain price. So Rolls-Royce (LSE:RR) shares spring to mind.
The business has been dealt a bad hand as far as the last few years are concerned. Hopping from the Covid-19 pandemic to the tragic war in Ukraine has seen the firm’s operations seriously hindered (and at times halted).
Rolls-Royce is down over 30% this year. So, should I be snapping up some shares?
Latest results
A good place to start is by looking at the half-year results released last week.
The update revealed that compared to the same period last year, Rolls-Royce managed to increase revenues slightly to £5.3bn.
Despite this, investors still dumped the stock as underlying operating profits declined from £307m last year to just £125m this half. The business pinned this drop-off on the issues it currently faces from rising inflation and the Ukraine conflict, citing that “the external environment remains challenging.”
One positive was the minimal increase seen in net debt. Compared to H1 2021, it had risen only £20m to £5.16bn, which is encouraging.
However, even though the small jump does provide some optimism, the debt itself remains a large issue. A debt pile of this magnitude could hinder the business going forward. And with interest rates on the rise, this is a further stumbling block.
Rolls-Royce has taken strides to eradicate some of this debt, such as the sale of ITP Aero to an American private equity firm. Yet for me, this is still a deterrent.
Is it time to buy?
So, is it time to snap up some shares?
Its latest update reveals the harsh reality of the current economic conditions. And the firm is also feeling this in other ways.
For example, the company is currently locked in a pay dispute with labour union Unite. Its previous offer of a £2,000 cash lump sum was rejected. And now members are balloting on a new offer of a 6.5% base pay increase. Taking place from 3 August to 17 August, the outcome of this could have implications for the Rolls-Royce share price.
But while the outlook is murky for the business, a reviving aviation sector could save the firm. Despite the issues currently being seen at airports, the travel sector has made some decent strides to pre-pandemic levels. Investors will be hoping this can continue.
With this said, I won’t be adding Rolls-Royce to my portfolio right now. Its situation is a representation of the tough times we face. And with supply chain issues potentially worsening due to poor China-Taiwan relations, this could see the stock suffer further. I’ll be keeping Rolls-Royce on my watchlist for now.