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Let’s do a quick recap on what’s been happening with Rolls-Royce Holdings (LSE: RR.) shares…
The price rise had been flattening off a bit since the start of 2026. But it just spiked up again, climbing 22% in the past month. Over the past five years, the stock’s back to a huge 1,163% rise. And Rolls is shaping up to be one of the most popular ISA buys in June — possibly even the most bought. So can anything stop this bull from running?
Big ISA buy
According to investing platforms like AJ Bell and interactive investor, Stocks and Shares ISA investors have strongly favoured Rolls-Royce throughout 2026. But why, after the price has already escalated so far? I’m seeing a number of driving forces…
- Defence is a major investing theme in 2026.
- Rolls is seeing a resurgence in civil aviation income.
- City brokers remain strongly bullish.
On that last point, a big majority of the brokers putting valuations on Rolls-Royce shares have them as a Buy.
The average price target of 1,425p is only 2.4% ahead of where we are at the time of writing. But the same thing has been happening for years… they set a modest target, it’s quickly beaten, and then we get a new target that’s a bit further ahead.
The next three years?
It can be dangerous chasing price targets, mind. And I expect the same brokers will be quick to predict falls should we see signs of the wheels coming off. I am, however, more interested in actual performance forecasts.
On that score, analysts do seem to have the projected figures to back up their enthusiasm. Here’s what they’re predicting over the next three years…
| Year | 2026 | 2027 | 2028 |
| Earnings per share | 37.7p | 43.5p (+15%) | 51.4p (+18%) |
| Price-to-earnings (P/E) | 36.1 | 31.2 | 26.4 |
| Dividend per share | 12.3p | 14.4p (+17%) | 17.5p (+22%) |
| Dividend yield | 0.9% | 1.0% | 1.3% |
| Net cash | £3.0bn | £4.4bn (+47%) | £5.3bn (+20%) |
Now, first of all, a caution… we really shouldn’t rely too much on forecasts. The future rarely comes anywhere near the precision they suggest, for one thing.
But if these are close to being accurate, doesn’t this look like a growth share well worth its premium P/E valuation? I’m moved to say I think it might.
Why not buy?
My biggest worry is that I’m not sure today’s valuation provides enough safety for things that might go wrong. Do investors just assume this frantic defence spending will go on for ever? Well, I don’t think it will. Maybe my spectacles are too rosy, but I foresee another era of peace coming.
I’m also concerned about these small modular reactors (SMRs). It’s not about the technology, which I think is quite stunning. It’s about commercialisation and the long-term profit potential. CEO Tufan Erginbilgic puts the global SMR market north of $1trn. But assuming that will happen, and betting on Rolls-Royce’s potential share, involves a fair bit of risk.
Investors who are less risk-averse than me could still do well to consider Rolls-Royce shares today. But the price is a bit too rich for my blood.
Should you invest £5,000 in Rolls-Royce Plc right now?
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Alan Oscroft does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
