After their rapid rise from 69p in 2021, more and more people are saying Rolls-Royce (LSE: RR.) shares can’t keep up the momentum – and are perhaps even overvalued at £14.41

I think the naysayers are wrong, and that the shares could still be ‘cheap’. Here are seven reasons why.

Growth opportunities

Reason 1: Artificial intelligence (AI) exposure. After the initial AI hype, it seems that many of the best stocks to buy are those providing the proverbial ‘picks and shovels’ for the AI buildout.

Well, Rolls-Royce is getting a slice of the action with its back-up power generation for data centres. Providing things like diesel generators in its Power Systems division could offer more growth opportunities should the AI revolution continue apace.

Reason 2: Barriers to entry. Around half of the firm’s sales are from Civil Aerospace – producing and maintaining the engines that keep passenger planes flying. The expertise needed is vast which provides a natural moat. Put simply, this is a revenue stream that is largely safe from new competitors.

Reason 3: Share buybacks. Rolls-Royce is currently spending £7bn–£9bn on buying back its own shares between 2026 and 2028. This could provide further momentum for the share price to keep rising. Many of the great success stories in recent years have come in the wake of big buyback programmes.

More reasons

Reason 4: Nuclear power. The introduction of small modular reactors (SMRs) could be a huge growth avenue as these mini nuclear power stations come into operation in the 2030s. Rolls-Royce has the know-how, the plan, and has been signing deals with Czechia and Great British Energy.

It’s worth mentioning that this is still experimental technology and the firm hasn’t built a single one yet. There’s substantial execution risk here. And if the technology doesn’t come up to scratch, then the impact would likely be felt in the share price.

Reason 5: Defence spending. The Rolls-Royce Defence division has been boosted by increased military spending. I expect spending to keep rising in the coming years. The firm makes things like nuclear reactors for submarines. One source of revenue is the use of these reactors in the AUKUS submarine partnership with Australia.

Reason 6: An undemanding valuation. At first glance, the Rolls-Royce share price has a hefty premium attached. But a forward price-to-earnings ratio of 28 looks reasonable for a firm growing earnings at such a clip. That figure will fall further if profits continue to increase as the forecasts suggest they will.

Reason 7: Debt is under control. One of the reasons for the Rolls-Royce malaise post-pandemic was weakness in the balance sheet. But now, with net debt of £3.3bn turning into a £2.1bn net cash position, the company looks far from overextended.

Overall, I think the stock is worth considering.

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John Fieldsend owns shares in Rolls-Royce.