Image source: Rolls-Royce plc
Three years ago, Rolls-Royce (LSE: RR.) shares were at rock-bottom levels. At the time, the company was losing money hand over fist and very few investors were optimistic about its share price.
In early 2023 however, Tufan Erginbilgiç breezed in as CEO and started to quickly turn the company around. And since then, the shares have soared in value.
Here’s a look at how much a £2,000 investment in Rolls-Royce shares three years ago – before Erginbilgiç came in – would be worth now.
Life-changing financial gains
In fact, three years ago to the day, Rolls-Royce’s share price ended at 91p. So let’s say an investor got in at that price – they would have picked up 2,197 shares (ignoring trading commissions) for £2k.
As of Friday (19 December), those shares were worth about £25,150. Because the share price was around 1,145p.
It gets better though. Because Rolls-Royce has also paid some small dividends lately. This year, it has rewarded investors with 10.5p per share in dividends. So the investor with 2,197 shares would have pocketed about £230 in income.
Overall, the investor would have turned £2,000 into around £25,400. What an incredible result in just three years.
The outlook from here
So what’s the deal with the shares now? Can they continue to deliver for investors? Well, to my mind, the answer to that really depends on the timeframe the investor’s looking at.
In the short term, I actually think Rolls-Royce shares may struggle a little. The reason for this view is that the valuation looks a little stretched at present (the forward-looking price-to-earnings (P/E) ratio is about 35, which is very high) and the share price pattern is starting to look a little weak (it’s lost its strong momentum lately).
Given this set-up, I wouldn’t be surprised if 2026 was a consolidation year. After three years of huge gains, the stock may take a breather.
But taking a longer-term view, I’m more bullish. Because this company now has multiple long-term growth drivers, including the civil aerospace market, the boom in global defence spending, and the nuclear energy revolution.
I reckon the latter could be a big growth driver in the long run because it’s looking like that in the years ahead, both governments and corporations are going to embrace this form of energy. And Rolls-Royce has a lot of experience here. Looking ahead, it’s aiming to be a global leader in Small Modular Reactors (SMRs) – small nuclear reactors that can be positioned closer to the grid.
It’s worth noting that earlier this year, the UK government officially named company subsidiary Rolls-Royce SMR as the preferred bidder to build the country’s first SMRs. These will help support the UK’s clean energy mission.
Realistically though, material revenues and profits from these SMRs are many years off (early 2030s at the soonest). And I should point out that there’s no guarantee Rolls-Royce will end up being an industry leader here – there are plenty of other companies developing the technology.
Better opportunities in the near term?
So are the shares worth a look today if an investor doesn’t own them? Well, they could be for those with a long-term horizon. Personally though, I feel that there are better opportunities in the market in the near term.
