Rolls-Royce Share Price Near Record Highs, Why I Still Think It’s a Buy

The Rolls-Royce (LSE: RR) share price remains close to record highs, trading around 1,160p after a strong rebound last week. The stock has been one of the best-performing names on the FTSE 100, gaining more than 180% since early 2023 when it traded near 400p. Whereas there are some investors who are afraid that the rally may soon lose momentum, I disagree. What we’re seeing isn’t irrational exuberance, it’s investors finally pricing in a turnaround that has been years in the making.

One of the main factors that led to that optimism is the manner in which the management has been dealing with its forecasts. Analysts also observe how Rolls-Royce has been under promising in its predictions to over deliver and thus setting real expectations and then exceeding them on a regular basis.

The credibility has played an important role in restoring investor confidence and driving consistent institutional demand.

Rolls-Royce’s Turnaround Story Gains Strength

Through the leadership of its CEO Tufan Erginbilgic, Rolls-Royce has carried out one of the most incredible turnarounds in the recent FTSE history. Its six-month performance indicated robust performance in all its main sectors, which point to a tight rein on costs, growing margins, and robust cash-generation.

Operating profit surged by 51% to £1.73 billion, while margins climbed to 19.1% from the previous year’s levels. Free cash flow reached £1.58 billion, representing a 37% improvement, and earnings per share jumped 76% to 15.7p. Following the results, management upgraded its full-year operating profit forecast to between £3.1 billion and £3.2 billion, above the earlier range of £2.7 billion to £2.9 billion.

According to brokerages such as UBS and Morgan Stanley, this new guidance has been termed as conservative with all the three divisions; civil aerospace, defence, and power systems already operating within the company long term margin targets. This implies that there is more upside potential in case 2026 is associated with slower economic conditions.

Rolls-Royce Valuation Remains Below Global Peers

Despite a steep share price rise, Rolls-Royce remains cheaper than most of its global competitors. The stock trades at a forward P/E of around 17, compared to a sector average of nearly 32. Aerospace and defence giants such as BAE Systems, RTX, and TransDigm command far higher valuations despite delivering lower margin expansion.

The company’s improved balance sheet and growing free cash flow continue to attract long-term investors. With debt levels down, order backlogs rising, and continued focus on high-margin projects, Rolls-Royce’s valuation still appears reasonable given its earnings momentum.

Rolls-Royce Share Price Technical Outlook

The latest chart shows Rolls-Royce consolidating near the upper Bollinger Band between 1,135p and 1,176p, indicating strong underlying demand. The 20-day simple moving average, currently around 1,135p, is acting as an important support level, while the lower band near 1,094p forms the next layer of stability.

Momentum indicators are balanced. The RSI (14) sits at 51, suggesting neutral sentiment after several weeks of gains. A decisive break above 1,176p could open the way toward 1,250p, while a short-term dip below 1,094p could trigger mild profit-taking before buyers step back in.

Outlook: More Room for Upside if Growth Continues

The right-up of Rolls-Royce is not merely an indication of the market boom, but rather a narrative of regained trust and stable performance. Its approach of making conservative goals has been a benefit to the company as it has managed to meet its targets many times without appearing overextended.

The fundamentals of the stock suggest a tentatively positive outlook even following an outstanding performance. The Rolls-Royce share price may keep rising until 2026 so long as the company keeps its earnings growth trend and its margins continue to grow.

For now, the scales between valuation, earnings momentum and investor confidence continue to go in the favor of the bulls, and that’s why, despite the noise, I’ll be adding to my position as soon as the next dip presents itself.

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