Rolls-Royce (LSE: RR.) shares could be worth 1,653.75p by the end of 2027…. at least, that’s my opinion. It would mark a further 16.7% gain from the current valuation of 1,417p as I write on Monday 29 June.
It would certainly be an impressive result, given the 46.4% gain the stock has already delivered over the past 12 months. But how solid is that number really?
Crunching the numbers
I’ve been looking at the company’s forward price-to-earnings (P/E) ratio as part of my calculations.
Analyst consensus estimates of the company’s forward earnings per share (EPS) are 37.8p. Based on today’s 1,417p share price, that gives the stock a forward P/E ratio of 37.5 right now.
How about my price target for 2027? Here’s how the maths breaks down:
- Current price: 1,417p
- FY2026 consensus EPS: 37.8p
- Implied forward P/E: 37.5x
- FY2027 consensus EPS: 44.1p
- Projected 2027 price (same 37.5x multiple applied): 1,653.75p
- Implied upside: 16.7%
That 37.5 times forward P/E multiple is the key here. If the market keeps paying that much for Rolls-Royce earnings, the share price should track EPS growth fairly closely. So, what’s behind the forecasts?
Why the market pays such a rich multiple
Today, the company has a market cap of well over £100bn and has generated some serious returns for investors in recent years. There are a couple of big factors behind why investors are willing to pay a sizeable multiple to invest in the company.
The scale of the turnaround under chief executive Tufan Erginbilgiç since January 2023 has been enormous. Civil aerospace flying hours have recovered strongly, defence spending has surged globally, and margins have improved sharply.
We have transformed Rolls-Royce and delivered significant value for our shareholders. Our performance in 2025 demonstrates the strength of our strategy and the quality of our execution.
Tufan Erginbilgiç, Chief Executive, Rolls-Royce
The company is also operating in several markets with potential high growth prospects including aviation, defence and power systems.
Consensus forecasts (compiled from 12 analysts in April 2026) point to continued momentum: revenue is projected to grow from £22.7bn in FY26 to £27.5bn by FY28, with free cash flow rising from £3.7bn to £5.2bn over the same period.
That’s the kind of growth trajectory that can justify a rich multiple. So, what are the risks of delivering this?
The risk that could break the maths
The whole projection rests on the market continuing to value the company at roughly 37 times forward earnings. That’s a big assumption.
Any disappointment on civil aerospace flying hours, a slowdown in defence spending, or a miss against the consensus EPS figures could see that multiple compress sharply, dragging the share price down even if earnings still grow.
The shares are also trading 7.5% below their 52-week high of 1,532.6p, a reminder that sentiment here can shift quickly. The dividend yield of just 0.7% offers very little cushion if the growth story stumbles. And that’s exactly what I’ll be watching closely ahead of it’s half-year results release on 30 July.
My verdict
In my view, 1,653.75p is a defensible projection if the company keeps delivering against consensus — but it depends entirely on a rich valuation multiple holding up, not just on earnings growing as forecast.
I don’t currently hold the shares, but I am seriously considering buying in August after the company’s results announcement.
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Ken Hall does not hold any positions in the companies mentioned.
