Again, a company with just $18.7bn in annual revenue commanding a $2trn valuation is unheard of. It presumes that growth’s going to be enormous for many years to come.

Needless to say, if SpaceX doesn’t grow anywhere near as quickly as expected, this will almost certainly prove to be a bad investment by 2030. Market expectations are already through the roof.

By contrast, Rolls-Royce is far less of an unknown quantity. Last year, the engineering giant’s underlying operating profit jumped 40% to £3.5bn, and management sees this figure growing to as much as £4.9bn this year.

Note, this is at the lower end of previous medium-term (2028) guidance of £4.9bn-£5.2bn in operating profit. So it’s almost certain now that this target will be demolished before then.

This helps explain Rolls-Royce’s own premium P/E multiple of 40. But if the medium-term target’s merely met rather than easily beaten, this too could turn out to be a disappointing investment by 2030.

Digging deeper

At first, I was very sceptical about the SpaceX IPO in June. To me, it seemed overhyped and the valuation looked bonkers. So I stayed away.

Looking more closely at Wall Street’s forecasts though, the company’s expected to grow at breakneck speed. Below are the latest revenue and EBITDA projections, as per MarketScreener.

Admittedly, EBITDA isn’t the same as actual profit, and SpaceX is expected to report negative free cash flow in this period due to heavy capital spending. But an enterprise value/EBITDA of about 18 for 2028 isn’t crazy on the face of it. Indeed, it’s almost in line with Rolls-Royce’s equivalent forward-looking multiple.

Of course, it gets harder to accurately predict anything the further out we go. I would take Elon Musk’s prediction of $1trn in annual revenue by 2030 with a large pinch of Mars salt.

Still, Wall Street’s current forecasts imply a valuation of around 11 times expected 2030 EBITDA. For a growth company of this calibre, that looks far too cheap.

My verdict

Weighing things up, I reckon SpaceX has more chance of making better returns by 2030. But a really successful investment hinges on the long-term reusability of the Starship rocket, and that’s not guaranteed.

If Elon Musk can solve this fundamental issue [Starship reusability] it potentially drives down the cost of launches to space to the equivalent of terrestrial freight, opening up an unarguably massive opportunity.

Pivotal Research Group

As things stand, I’m happy to hold both stocks until 2030, and I think they’ll do well. But given the lofty valuations, investors may want to consider buying on dips.

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Ben McPoland owns shares in Rolls-Royce and SpaceX.