The Rolls-Royce share price hit new highs in November. What next?

November has been another record-breaking month for the Rolls-Royce share price. And the outlook for 2025 still looks bright.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Rolls-Royce plc

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Rolls-Royce Holdings (LSE: RR.) share price hit a 52-week high of 592.2p in November, extending its record-breaking run by yet another month.

And never mind the 80% share price rise in 2024, we’re up 650% since the latest climb got going in September 2022.

Created with Highcharts 11.4.3Rolls-Royce Plc PriceZoom1M3M6MYTD1Y5Y10YALL8 Apr 20207 Apr 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202120212022202220232023202420242025202502505007501000www.fool.co.uk

How much have I made from Rolls-Royce shares? Not a penny, and it’s all down to one of my favourite investing quotes.

Should you invest £1,000 in Games Workshop right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Games Workshop made the list?

See the 6 stocks

It’s not one of Warren Buffett‘s. No, it’s from an old friend who once observed: “You sure know how to buy shares that have already gone up“.

Momentum or fundamentals?

There’s another saying: “The trend is your friend until the bend at the end“.

Momentum can push share prices to dizzying heights. But trying to trade on that means having some way to guess when the final bend might come.

I can’t do it, so I look at fundamentals instead. But you know what? Fundamentals also make me think the Rolls-Royce share price could have further to go. Forecasts show earnings per share climbing from 2025 onwards. That’s after a fall in 2024 though, and forecasts are often wrong. So caution’s needed.

Valuation not too high?

Estimates put Rolls shares on a high price-to-earnings (P/E) ratio of 31. But it could fall to under 24 by 2026. Meanwhile, Tesla has a forward P/E of 162, with Nvidia on a relatively modest 51. Does that perspective mean Rolls-Royce is cheap? Or that US investors have taken leave of their senses?

To get some idea, I need to think about where the earnings growth Rolls-Royce needs might come from. In November’s trading update, CEO Tufan Erginbilgiç said: “Continued good performance year to date gives us further confidence in the delivery of our 2024 guidance.”

Trading outlook

At interim results time, Rolls raised its full-year guidance, saying: “We now expect underlying operating profit between £2.1bn and £2.3bn and free cash flow between £2.1bn and £2.2bn.

Key for me in the half was a 14% underlying operating margin, up from 9.7% a year previously.

But the Rolls-Royce recovery isn’t just about the aviation business getting going again and volumes of its aero engines getting back to normal. No, there’s new technology in the pipeline, which I reckon could give Rolls a competitive advantage in the coming years.

Energy changes

Much of it is centred on reduced carbon, as the firm’s “developing a highly efficient hydrogen reciprocating engine which is partly funded by the German government“.

In power generation, Rolls “won major Battery Energy Storage Systems (BESS) contracts, including a contract with Latvia to install one of the largest BESS in the EU.

It’s also pioneering small modular nuclear reactors, and has made the shortlist for a Swedish power company for a fleet of them.

I’m not buying

So I’m bullish about Rolls-Royce and its leading-edge technology. But I won’t buy now. I just think the high valuation (by UK standards) holds too much risk for my liking.

And I’ll never forget what that old friend told me. Still, if the price should fall…

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Nvidia, Rolls-Royce Plc, and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Investing Articles

This FTSE AIM stock has £2.3bn in net cash, and a market cap of £2.4bn!

I love this FTSE AIM stock, but it really hasn’t delivered for me yet. The stock trades with crazily low…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Down 15% in a week! Are these 5 FTSE 100 fallers screaming buys as markets plunge?

Five of Harvey Jones's favourite FTSE 100 stocks all have the same thing in common – they've fallen around 15%…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

2 stocks that have been crushed and now offer a ton of value

Edward Sheldon has been scanning the market for stocks that offer value after the sell-off. Here are two shares he…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

£10,000 invested in Aston Martin shares at Christmas is now worth…

Aston Martin shares have fallen from above £10 in early 2020 to pennies today. Is this the perfect time for…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

Up 5% in the last crazy week! Are these 2 income stocks the ultimate FTSE defensive plays?

Harvey Jones picks out two FTSE 100 dividend income stocks that have actually climbed while stock markets are heading in…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

2 beaten-down UK shares that now look really cheap

Looking for cheap shares to consider for the long term? These two British stocks offer a lot of value right…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

As stocks tank, is this a rare chance for ISA investors to get rich?

Shares have collapsed globally and valuations are becoming, on paper at least, a lot more attractive. Dr James Fox explores…

Read more »

Investing Articles

2 strong FTSE 100 dividend shares to consider as recessionary risks increase

Looking for secure passive income stocks to consider buying as thumping trade tariffs loom? Here are two FTSE 100 dividend…

Read more »