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While Rolls-Royce (LSE: RR.) has been one of the best-performing stocks in the FTSE 100 index over the last year, its share price has actually taken quite a bit of a hit recently. After rising to around 1,420p in early March – after the company’s blockbuster 2025 results – it has fallen by about 15% to 1,207p.
Is now the time to consider buying shares in the engineering powerhouse for an ISA or SIPP? Let’s take a look at the set-up.
The case for buying today
In my view, there’s certainly a case for buying the shares today.
For a start, whenever the stock has pulled back recently, it has rallied and moved even
higher shortly after. We’ve seen this pattern play out a number of times – it happened earlier this year and also late last year.
One reason it keeps rebounding is that the company’s results just continue to be brilliant. Just take a look at the numbers for 2025.
For the year, group operating profit came in at £3.5bn versus £2.5bn in 2024. Meanwhile, free cash flow amounted to £3.3bn versus £2.4bn a year earlier.
Looking ahead, the company said that it’s targeting operating profit of £4.9bn to £5.2bn as its transformation continues. So, it clearly expects the strong operational momentum to continue.
“Our transformation continues with pace and intensity. We are consistently achieving outcomes that were not possible before our transformation. With our new capabilities and mindset, we have navigated challenges from supply chain to tariffs, and delivered a strong performance in 2025, all while we built the foundations for significant growth for years to come.”
Rolls-Royce CEO Tufan Erginbilgic
I’ll point out that the story here isn’t just about the company’s transformation under CEO Tufan Erginbilgic. It’s also about structural long-term growth drivers.
In the long run, this company looks very well positioned to benefit from increased defence spending. It also looks set to capitalise on the nuclear energy boom.
One other thing to point out here is that 1,200p could potentially act as a level of support for the share price (a point at which a downward trend pauses). This was a previous high for the stock and sometimes previous highs act as support.
Better buying opportunities ahead?
Having said all that, there’s also a case to wait for a better buying opportunity. I wouldn’t be surprised to see the share price fall further.
You see, while the stock has come down 15%, it still looks quite expensive. Looking at the earnings forecast for 2025, the forward-looking price-to-earnings (P/E) is in the mid-30s.
Now that markets are a bit more fragile, this high valuation could start to spook investors. Ultimately, it doesn’t leave any room for an operational setback or disappointing earnings.
Going back to the chart, if 1,200p doesn’t act as support, we could potentially see 1,100p or even 1,000p. In this uncertain market environment, we can’t rule out this kind of share price weakness.
My move now
Personally, I’m going to hold off on buying for now. I am keen to own the stock at some stage, however, I’m not ready to pull the trigger yet.
