Picture supply: Rolls-Royce plc
It has been an outstanding few years for aeronautical engineer Rolls-Royce (LSE: RR). The shares had been among the many best-performing on the FSTE 100 over the previous a number of years. But, even coming into 2025 with that observe document, they’ve accomplished brilliantly once more. The Rolls-Royce share value is up 86% for the reason that flip of the 12 months.
Not solely have the shares had gorgeous momentum in recent times, however the enterprise efficiency has additionally been spectacular.
Missed alternatives
As 2024 loomed, I believed to myself, “ought to I purchase Rolls-Royce shares?” and determined in opposition to it, lacking out on a 12 months of huge development.
As 2025 loomed, I believed the identical factor, once more did nothing – and once more missed out on a storming efficiency.
Now, with 2026 on the horizon and eyeing the five-year Rolls-Royce share value acquire of 741%, I’m (shock, shock) asking myself the identical query.
May now be the time for me so as to add some Rolls-Royce shares to my portfolio?
Value doesn’t look unjustifiable
an aeroplane’s vapour path doesn’t essentially point out the place it should go subsequent. It might probably change course.
The identical is true for share costs. Rolls-Royce’s wonderful efficiency in recent times isn’t any assurance of what could come subsequent.
Nevertheless, what I do discover attention-grabbing is that regardless of that 741% acquire over 5 years, right now’s Rolls-Royce share price-to-earnings ratio is 16.
That isn’t a screaming cut price. However I additionally don’t suppose it’s essentially costly for a confirmed blue-chip enterprise with ongoing development prospects.
Tons to stay up for
Lately (and once more this 12 months), Rolls-Royce has raised its medium-term outlook. It has additionally constantly delivered on its monetary targets, boosting Metropolis confidence within the firm’s administration.
Only a few weeks in the past, it affirmed its full-year 2025 outlook of £3.1bn-£3.2bn in underlying working revenue and £3.0bn-£3.1bn in free money move.
With demand buoyant in civil aviation and defence, plus resilient long-term demand in energy techniques, all three of Rolls-Royce’s enterprise divisions have the wind at their again.
Add to that the corporate’s sharpened monetary self-discipline of latest years and deal with monetary supply and I see the funding case as robust.
Staying on the sidelines
So on that foundation, I reckon the Rolls-Royce share value may proceed its upwards march in 2026.
Nonetheless, there are a few issues that put me off investing, which means I’ll keep on the sidelines for now.
One is, paradoxically, how effectively the share has been doing.
A part of that’s undoubtedly about enterprise efficiency however a few of additionally it is momentum. Momentum can all of the sudden change, even when a enterprise does effectively.
Accordingly I see a threat that the Rolls-Royce share value may very well be hammered even when the corporate barely disappoints the market in any method.
One other threat that issues me is the prospect of any slowdown in civil aviation demand. That has been excessive in recent times, however geopolitical spats and tightening shopper budgets may doubtlessly result in a slowdown.
The business often additionally will get blindsided by dramatic in a single day demand falls which are unexpected, as throughout the pandemic and after terrorist assaults.
Bearing these dangers in thoughts, I’m not going to be shopping for Rolls-Royce shares as we head in the direction of 2026.
