As I write on Tuesday morning (8 April) the Rolls-Royce Holdings (LSE: RR.) share price is up 6%.

It’s a rebound after the preliminary fallout from President Trump’s world tariff warfare. Since a peak of 818p in March, Rolls-Royce shares fell 22% to shut Monday at 635.8p.

Leaping ship?

Buyers who’ve watched development shares for any time will know {that a} robust bullish spell is commonly knocked off-course by a particular occasion. Folks see the autumn and resolve to get off the short-term trip. And all of us nod sagely and resolve that sure, the shares perhaps have been getting a bit dear.

Is that what’s taking place to Rolls-Royce shares now? I don’t assume so.

For one factor, the inventory market rout kicked off by Trump’s distinctive tackle economics actually says nothing concerning the long-term prospects for the corporate. Or for any world firm, for that matter.

Valuation

And Rolls-Royce shares actually haven’t reached the sort of sky-high valuations that always precede a development bubble burst. A minimum of, I don’t assume so, judging by what the analyst forecasts say.

Possibly the spike kicked off by February’s full-year outcomes might need pushed up a bit far, however I don’t assume I’m seeing greater than that.

We’re a price-to-earnings (P/E) ratio of about 25.5 for 2025. Earnings per share development forecasts out to 2027 are stable somewhat than gorgeous. However they’d nonetheless drop the P/E to round 21 by then.

The P/E doesn’t come near portray the entire image and buyers want to contemplate much more measures. However issues will get higher.

Modify for money

Rolls has turned spherical its debt place of only a few years in the past in spectacular vogue. Not solely is internet debt worn out now, however Rolls is on for £1.6bn internet money this 12 months. And the analysts see that hovering to just about £7.2bn by 2027.

A pile of money provides to the worth of an organization. I imply, the enterprise plus billions in money is value extra than simply the enterprise, proper? If I alter these P/E forecasts to permit for the money and work out an equal for the enterprise alone, one thing fascinating occurs.

I get a cash-adjusted efficient P/E for 2025 of 25, only a bit decrease. However the adjusted 2027 P/E drops to 19. That’s not down at banking sector ranges, but it surely makes it look even much less like a bubble valuation to me.

Tariff threat

Whereas all this would possibly look good, we shouldn’t merely ignore the tariff problem. Rolls is in a world enterprise, one of many world’s few large-scale aero engine makers. And certainly one of its huge markets would possibly all of a sudden have been made an entire lot more durable. Even with out that particular threat, a world slowdown will seemingly make an impression.

If Trump’s tariffs stay the place they’re, I count on the entire business will really feel ache. And it may very well be greater than a short-term impact.

It’d make sense to attend and see the place this all goes. However then, I believe long-term buyers ought to positively contemplate a price dip like this as a doable alternative.