Rolls Royce reports another positive update

As Rolls Royce reports positive Q2 results Helal Miah, investment research analyst at The Share Centre explains why he recommends investors ‘buy' the stock.
 
"Rolls Royce reported another set of good results this morning with first half revenues at £7,345m, up 28% from the same period last year, and profits increasing by 31% - both well ahead of expectations. The performance of the company is a crucial barometer for the sector, as data from The Share Centre's Profit Watch UK shows it is the most profitable Aerospace & Defence company, accounting for 55% of net profits last year.
 
"The company's strong results were as a result of continued demand for its engines and other related services and the full integration of Tognum, the joint venture with Daimler. Investors will be pleased to see the order book has risen even further to £69bn, up 15%. Significant milestones have been reached as the first flight of the Trent XWB-powered Airbus A350 was completed and the certification of military aircraft powered by the TP400 engine. Amongst the many projects completed Rolls Royce has also opened a new services centre for Civil Aerospace at Heathrow.
 
"Rolls Royce is one of the most highly rated companies amongst its peer group on a P/E basis. However, we would suggest that this is justified given its growth potential and ability to improve margins, as there is significant cost cutting measures that could yet be implemented. We continue to recommend this stock as a ‘buy' for long-term investors seeking a medium level of risk. However, investors may want to consider drip feeding into the stock as the strong share price performance increases the likelihood of some profit taking."