Rolls-Royce‘s (LSE: RR.) share price continues to climb. This year, it’s risen from £11.50 to £13.60 – an increase of about 18%.

Could it hit £20 in 2026? Let’s take a look at the set-up.

H1 earnings will be crucial

I don’t see a lot of room for an increase in the valuation here. Because the earnings multiple’s already pretty high.

With analysts expecting earnings per share of 37.3p for 2026, the forward-looking price-to-earnings (P/E) ratio’s about 36. I’d be very surprised if this valuation metric was to increase significantly beyond that level as it’s more than twice the UK market average.

That doesn’t mean the stock can’t go higher though. Because there’s a chance that we could see an increase to full-year guidance when the aerospace and defence company posts its half-year results on 30 July.

One brokerage firm that expects guidance to be raised is Jefferies, which currently has a £18.70 price target for the stock. If guidance is hiked from £4bn-£4.2bn of underlying operating profit and analysts lift their earnings forecasts, the share price could rise without an increase in the P/E ratio.

Is £20 a possibility?

That said, a move all the way up to £20 could be a stretch. Because that’s about 47% higher than the current share price.

For the stock to surge by that amount, H1 results and guidance would have to be extremely strong. And personally, I think that’s unlikely given the disruption to the civil aerospace market this year due to the Iran war and the spike in oil prices.

What do analysts think?

It’s worth noting that no research firms have a price target of £20 or above for Rolls-Royce at the moment. Most of the recent targets published are around the £15-£16 mark:

• Goldman Sachs: £15.50.
• JP Morgan: £16.25.
• BNP Paribas Exane: £15.00.

The average price target, according to my data provider, is £14.23. That’s only about 5% above the current share price.

£20 in 2027?

I’ll point out that I do think a share price of £20 could be a possibility in the years ahead because the company should see high demand for its aerospace, defence, and nuclear technology.

I reckon we could potentially see this price achieved in late 2027 or 2028. I’m assuming here that the backdrop remains favourable and that earnings continue to rise.

Worth a look today?

Could the shares still be worth considering, even if a share price of £20 probably isn’t on the cards in the near term? Potentially – the trend’s up and there’s plenty of long-term potential.

That said, I reckon it could be worth waiting for a better entry point. With a bit of patience, it may be possible to get in at a more attractive valuation.

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Edward Sheldon owns shares in JP Morgan