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Much has been written about Rolls-Royce Holdings‘ (LSE:RR.) shares over the past few years. Indeed, the astonishing post-pandemic recovery in its share price has been incredible to watch and worthy of plenty of headlines.
At the end of November 2020, just after the aerospace and defence groupâs life-saving £2bn rights issue was completed, its shares were changing hands for £1.06. Today (16 April), they’re fetching £12.92. Ignoring dividends, thatâs an overall return of 1,119%. Â
No more to say as those figures speak for themselves. However, thereâs lots to say about the group’s future. So here goes…
A key contributor
What Iâm most excited about is Rolls-Royce’s civil aviation business. In 2025, this division contributed 51.8% (£10.4bn) of revenue and 61.5% (£2.1bn) of operating profit (both reported on an underlying basis). At 20.5%, this part of the group had the highest operating margin.
These numbers suggest that Rolls-Royce knows what itâs doing when it comes to manufacturing and maintaining aircraft engines. But itâs the future I want to look at. At the moment, the group focuses exclusively on widebody planes. However, it wants this to change.
A different approach
When reporting last yearâs results, the group said: âWe also see an opportunity to re-enter the large and growing narrowbody market, which offers attractive synergies to our existing widebody and business aviation activities, based on our UltraFan technologiesâ.
And I reckon the potential is enormous. According to latest (June 2025) figures from the International Air Transport Association (IATA), there are 30,300 active aircraft in the world. Of these, 18,495 are single-aisle planes and 5,869 are larger ones. The rest are turboprops and small jets.
Whatâs more, at December 2025, itâs estimated that there was an order backlog of 17,000 aircraft. This has doubled in the past few years.
With relatively little competition — there are only four companies making aeroplane engines at the moment â its UltraFan technology is proving to be 25% more fuel efficient than the groupâs first-generation Trent engine. So the scale of its aviation business could be transformed if all goes to plan.
And why wouldnât it make a success of it? It already powers a third of the worldâs widebody fleet.
Some challenges
However, there are risks. The groupâs shares are trading at 30 times forecast (2028) earnings. Any sign that these expectations will not be met and there could be a sharp correction in the groupâs share price. Given that the business is exposed to global aviation cycles and macroeconomic shocks, this could happen.
Investors also appear to have placed significant value on its small modular reactor programme. However, this has yet to be proven to be commercially viable.
My view
Despite these issues, I think the groupâs in good shape and well positioned to take its operations to another level. However, patience is required. The first revenue from its single-aisle UltraFan engine is not anticipated until the early 2030s.
Until then, its defence division’s likely to continue growing as a result of increased global uncertainty. Also, I suspect the requirement for new data centres will help expand its power systems business.
Despite its lofty valuation, I still think Rolls-Royce is a stock for long-term investors to consider. There, Iâve said it.
The post Up 1,119% in 65 months, is there anything left to say about Rolls-Royce shares? appeared first on The Motley Fool UK.
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More reading
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James Beard has positions in Rolls-Royce Plc. The Motley Fool UK has recommended Rolls-Royce Plc. 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.
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