Back at the start of 2025, I thought the business outlook for Rolls-Royce (LSE: RR) was promising – but was less enthusiastic about its share price.

In January, after the Rolls-Royce share price had already increased 513% since the end of 2022 just a couple of years before, here is what I wrote: “If the company can improve its profitability as it hopes to, earnings per share ought to increase. That prospect alone could see the Rolls-Royce share price increase this year, especially if the company issues upbeat news about how it is performing relative to its medium-term goals.”

Lo and behold, six months on and that has come to pass. The share price is now 66% above where it was at the start of 2025, despite having already performed brilliantly in the several years leading up to that.

So can this incredible run possibly continue – and ought I to invest?

Why I didn’t buy then

I ought to start by explaining why, since I could see how the share price might grow this year, I did not buy back in January and subsequently missed out on the 66% increase.

The issue then was not the underlying business. It was simply that I felt the share price was too high to offer me a satisfactory margin of safety.

The company did indeed issue upbeat news about its medium-term goals. Not only did it meet some of them early, but it raised those goals. The City lapped that up and the Rolls-Royce share price has accordingly performed brilliantly in 2025.

I am happy with my decision back in January, as each investor needs to strike their own balance between risk and potential reward. But, with the business now looking even stronger than it did back then, could now be my moment to buy?

Not a cheap valuation

Currently, the Rolls-Royce share price is 33 times earnings. That looks pricey to me, especially for a long-established company in a mature industry.

Last year’s net profit margin of 13% was decent, but Rolls operates in an area that typically offers middling profit margins at best and I do not see that changing dramatically.

Momentum could keep pushing the share price up. As an investor not a speculator, I ignore that and seek to buy shares in companies that I think have good businesses and an attractive price tag, due to competitive pressures.

I like the business. Rolls-Royce has a large installed client base, lots of patented technology and a world-class engineering expertise.

The price still looks too expensive for my tastes though. It could get cheaper from a forward-looking perspective if revenues rise, profit margins increase, or both. High demand in defence and civil aviation could boost revenues. Meanwhile, Rolls’ efficiency programme may boost profit margins.

But I see a limit to growing profitability without becoming less competitive versus rivals. Meanwhile, a massive risk I see to revenues is the sort of occasional unforeseen event like a pandemic or war that sinks demand for civil aviation overnight.

If that does not materialise and business remains strong, I reckon the Rolls-Royce share price could potentially keep rising. But I am uncomfortable with those risks given the current valuation, so will not be investing.