Rolls-Royce (LSE: RR) shares have broken the sound barrier since chief executive Tufan Erginbilgic jumped on board but have they flown too far, too fast?

The share price has fallen around 20% from its August peak, and investors who missed out on its stunning run will be wondering whether they have a fresh opportunity to buy today.

The shares became stunningly expensive after their spectacular run, with the price-to-earnings ratio nudging 50x. That’s way above the FTSE 100 average of around 16x, leaving them vulnerable to profit-taking. More recently, the AI bubble has started to deflate, and that’s a worry too.

The FTSE 100 flyer falls back

Rolls-Royce’s Power Systems division, which accounts for around a quarter of profits, has enjoyed strong growth supplying power generation equipment to data centres, both for back-up and increasingly, prime power. Yet data centres are proving unpopular and if development is blocked, or proves too expensive, investors will question how much growth Rolls-Royce can squeeze from this opportunity.

Its Defence division continues to perform strongly, with first-half underlying operating profit up 57% to £522m. Civil Aerospace is also doing well, with large engine flying hours reaching 113% of pre-pandemic levels in the first half.

That surprises me, as the Iran war sends jet fuel prices to the stars, and threatens shortages. That could ultimately push up ticket prices and dent passenger demand. Flying activity has proved remarkably resilient but things could get tight.

Rolls-Royce has some exciting opportunities. It’s developing small modular nuclear reactors, with contracts in Britain, the Czech Republic and Sweden. A new £2.5bn government-backed programme to develop next-generation engines could also open up the vast and potentially lucrative single-aisle aircraft market. But these are long-term prospects, and there’s still a long way to go.

Still a premium valution

Even after the recent retreat, Rolls-Royce shares remain expensive with a trailing P/E of 41. The forward P/E is a more amenable 27x, but it’s hardly in the bargain bin.

Engine durability remains a challenge, particularly for the Trent XWB-97, and airlines want proof that reliability is improving before placing more orders. Supply chain problems could also restrict production and cash flow. And if aviation demand weakens, the lucrative aftermarket business could suffer.

The board previously raised its 2026 operating profit forecast to between £4.7bn and £4.9bn, with free cash flow of £3.8bn to £4bn. That’s impressive, but expectations are so high that investors may be disappointed if Rolls-Royce doesn’t smash through both.

Rolls-Royce publishes its next trading update on Thursday 12 November, and this is an opportunity for Erginbilgic to reassure the market. If he can do it again, the shares could enjoy an instant lift.

This is a terrific company and worth considering after this recent setback. But with so much going on, and plenty of scope for further setbacks, it may be worth waiting for a cheaper entry price. Here’s another FTSE 100 growth stock that has sold off recently, but could prove better value….

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Harvey Jones owns shares in Rolls-Royce.