It seems incredible to recall that just four years ago, the Rolls-Royce (LSE: RR) share price was in pennies, but the shares have soared since then.

The share price is up 1,272% over the past five years – and 25% so far in 2026.

That recent performance might not sound spectacular, but given that the wider FTSE 100 is up 9% so far this year, as an investor I would happily take 25% any day of the week.

Is there potentially more still to come meaning that it could make sense for me to invest even now?

Looking for the reasons behind the surging price

To answer that question, I think it helps to have some context.

For starters, a few years ago, the company was on its knees due to a collapse in civil aviation demand during the pandemic. So using a time when Rolls-Royce shares sold for pennies as a baseline is slightly flattering to the long-term performance of the share.

The share price has risen ‘only’ 540% since January 2020, before the pandemic took hold. That is still a very strong performance, but some way below the 1,272% I mentioned above.

After all, the risk profile faced by someone investing in 2022 looked very different to how it had a couple of years before.

It is also worth thinking about cyclical shifts in demand.

Civil aviation has bounced back and that has been core to Rolls-Royce’s business recovery. But the past few years have also seen surging demand in the defence sector.

There has also been growing interest in energy products including small modular nuclear reactors. So the shares have benefitted from positive demand trends across all its main businesses.

On top of that, the surging share price has built strong momentum.

Management has set and increased financial targets, consistently meeting them. That has boosted investor confidence, adding further positive momentum to the investment case.

If the business keeps performing well, I think the share price may move further upwards even from here.

Here’s my concern

Still, does that mean that the current Rolls-Royce share price is justified?

At 50 times earnings, I do not think so, even allowing for the prospect of earnings growth in coming years.  

I do not think that price is attractive — and I certainly do not think it offers me a sufficient margin of safety.

Price matters not only for the prospects of capital gains (or losses), but also because dividend yield is a function of dividend per share and the price paid. The high share price means Rolls currently yields a paltry 0.6%.

As for a margin of safety, multiple European airlines have reported weakening sales trends in some regions. The ongoing Middle East conflict and weak consumer confidence could exacerbate that.

For now, Rolls has managed that risk without hurting business performance, but that may not always be possible.

As we saw during the pandemic and on other occasions, civil aviation can also sometimes experience unforeseen sharp demand falls, over which engine manufacturers like Rolls have little if any influence.

So, I like the business but not its current price – and will not be buying Rolls-Royce shares. In today’s market, I think there are plenty of other great growth shares with far more attractive valuations.

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Christopher Ruane does not hold any positions in the companies mentioned.