Rolls-Royce (LSE: RR.) shares closed at just 111.94p on 11 June 2021, meaning 10,000 of them would have set an investor back £11,194.
As I write on Monday (15 June), that same investment would be worth a whopping £137,020. That’s a gain of £125,826 or 1,124% in just five years.
It’s one of the great FTSE 100 turnaround stories of the modern era. But has this ship sailed or could there be more gains to come for investors sitting on the sidelines today?
How does the maths break down?
Five years ago the company was fighting for survival, with flight hours crushed by the pandemic and serious questions over the it’s balance sheet.
Investors who held their nerve through 2021 and beyond have been rewarded on a scale few of them would have imagined.
That same £11,194 would look quite different invested at say a 4% average cash rate or even the Footsie itself over the same five-year period. Here’s how the maths stacks up:
| Rolls-Royce shares | FTSE 100 | Cash rate (at 4%) | |
| Investment in June 2021 | £11,194 | £11,194 | £11,194 |
| 5-year return | 1,124% | 49.6% | 21.7% |
| Estimated value today | £137,020 | £16,746 | £13,619 |
That six-figure gap shows the power of investing when we get it right. It’s what keeps me hunting for my next big buying opportunity.
But for those of us who like to buy and hold shares, what’s really behind the recovery?
What’s powering the engineering stock?
Today, the company boasts a market cap of over £100bn after an incredible turnaround journey.
Chief executive Tufan Erginbilgiç has slashed costs, expanded margins and refocused the business since taking the reins in 2023.
If you don’t have a strategy that can cascade down to 42,000 people, it won’t get delivered. Everything I do is about mobilising the workforce with purpose, focus, and alignment.
Tufan Erginbilgiç, Chief Executive, Rolls-Royce
Civil flight hours rebounded strongly after the pandemic, global defence budgets have surged, and demand for the company’s power systems division keeps growing.
Clearly things are going well for it, and long-term shareholders have been rewarded. But does the investment case stack up today?
Is there still time to buy well?
I don’t currently own any shares in the company, but I’m considering buying. The price-to-earnings (P/E) ratio of 19.9 doesn’t look stretched for a leading company in hot areas like defence and energy.
The stock is sat just 3.6% following this morning’s move, so investors are clearly still interested. But what about the risks?
A risky stock to consider buying?
Investors like me who are considering buying today probably won’t be getting a 1,124% return in five years’ time.
There are some risks worth highlighting. Civilian aviation areas of the business are tied to engine flying hours. The ongoing Middle East conflict is a large swing factor that could impact earnings, although there’s hope the new peace deal will dampen tensions.
Management has confirmed full-year guidance is unchanged despite the conflict, which is reassuring, but uncertainty remains.
Supply chain pressure across defence and execution risk in newer power markets are the other two big ones that I’m weighing up.
Yet it’s hard to think of a better sector than defence to invest in right now, in my opinion. I like the stock and it’s one of a handful that I’m considering buying right now.
Should you invest £5,000 in Rolls-Royce Plc right now?
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Ken Hall does not own shares in any of the companies mentioned.
