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Rolls-Royce (LSE: RR.) shares have shown remarkable consistency in the last three years. The share price has doubled or come pretty darn close in 2023, 2024, and 2025. The stock’s terrific run has had many an investor wondering whether the trick can be pulled off four years on the trot.
The early signs? They’re well on course…
Good news
The Rolls-Royce share price is up 16% in the year to date. It’s still early days of course – just January and February marked off the calendars as I write – but that’s almost exactly the trajectory that would take the share price to a 100% increase by the time we’ll be ringing in the New Year for 2027.
What’s been the good news? It’s hard to look further than the 26 February full-year trading update. The success of previous years was built on successive earnings beats and impressive numbers. And these numbers were impressive indeed…
The headline figure was a 40% jump in underlying operating profit, again beating analyst expectations. With cash flow increasing, Rolls-Royce were able to earmark a whopping £9bn for share buybacks in the years ahead. The share price was up 7% on the day although it retreated from that point by the end.
CEO Tufan Erginbilgiç might be accused of understating things with the comment: “Our transformation continues with pace and intensity.”
One notable detail was the company’s role in the artifical intelligence boom. The Rolls-Royce backup generators are providing the perfect complement for the heavy energy needs of AI data centres.
Cold water
Now, let’s pour a little cold water on the excitement here. For a company to double in market value inside a single year is very rare, and it becomes more rare the larger the company.
Rolls-Royce now boasts a market cap of £115bn, one of the largest UK companies. And a 100% gain would put it very close to the two battling it out for the FTSE 100 top spot at the moment – AstraZeneca and HSBC.
Another issue is that much of the previous growth was not because of increased earnings but increased valuation. Essentially, investors like the look of the engineering giant’s future prospects so a premium was put on the share price. Rolls-Royce now trades at 40 times forward earnings. That’s priced more like a pioneering tech company than a boring old manufacturer.
Taken together, these two factors do mean that continuing such strong performance will be harder than ever.
With all that said? I still think the shares are worth considering. And because I follow the Foolish approach of this website, then I’m not worried about one year or the next; I’m thinking about the long-term. And on that basis, Rolls-Royce looks in very good shape to me.
