Rolls-Royce (LSE:RR.) shares have fallen from an early-August peak near 1,586p to around 1,324p, their lowest level since June. When a high-profile FTSE 100 winner drops like that, it’s natural to wonder whether the party’s over.

But I’m not focusing purely on the chart. I think there’s something more important: engine flying hours. They matter because they drive aftermarket revenue, the recurring and high-margin part of the Rolls-Royce story.

The share price is fickle, wobbling on fear and sentiment. But flying hours? Those tell me whether the business is still working.

Why flying hours matter

Rolls-Royce earns a large part of its Civil Aerospace income through long-term TotalCare service agreements. In simple terms, airlines pay for engine care, and revenue’s linked to how much the engines are used. So more flying hours usually mean more aftermarket revenue, better cash generation and greater visibility. That’s the basic idea behind this investment narrative.

The share price works entirely differently. It can fall because of any number of random factors: higher oil prices, aviation demand, technical selling or just a broader market wobble.

To me, the recent decline feels more like weakening sentiment combined with a high valuation – rather than an underlying fundamental shift.

The numbers still look strong

The first-half results, published on 30 July, were impressive. Underlying revenue rose 26% to £11.3bn, while underlying operating profit jumped 46% to £2.5bn. The underlying operating margin reached 22.5%, up from 19.1%, and free cash flow rose 24% to £2bn.

This isn’t just a turnaround story any more. Rolls-Royce is generating cash, buying back shares and rebuilding confidence.

It also raised full-year guidance, now expecting £4.7bn-£4.9bn of underlying operating profit and £3.8bn-£4bn of free cash flow.

Berenberg recently upgraded the shares to Buy and lifted its price target from 1,270p to 1,430p. And those all important flying hours? It expects 6% growth in 2026! That matters, because it suggests demand for air travel and engine services is still healthy.

But the risks are real

I would be wrong to ignore the bear case. Higher oil prices are the elephant in the room, potentially leading to weaker aviation and, crucially, less flying hours. Plus, the high valuation remains a core concern. At roughly 40 times trailing earnings, Rolls is far from ‘cheap’. Investors have already paid for a lot of good news, so there’s little room for execution mistakes.

The takeaway? Never blindly buy the dip. A great company can still be a poor investment if the price already assumes several years of flawless delivery.

The next step

Investors are due a trading update on 12 November, which could hint at whether upward momentum is set to return.

Here are the key points to watch:

• Engine flying hours: are they growing close to Berenberg’s 6% forecast?
• Civil Aerospace margins: is the aftermarket still supporting profitability?
• Power Systems: is data centre and power-generation demand still strong?
• Guidance: does management maintain or raise full-year expectations?

In my view, Rolls-Royce still looks a quality business to consider holding — it’s just been hit by short-term price action. At the same time, I think it’s worth waiting for the 12 November update before making any big decisions.

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Mark Hartley does not hold any positions in the companies mentioned.