The Rolls-Royce (LSE:RR.) share price seems unstoppable. Throughout 18 of the previous 24 months, it’s gone up.

And in three of the six months when it fell, it went down by lower than 2.5%. Since August 2022, its common month-to-month enhance has been 8.7%.

Those that had been courageous sufficient to take a position when the share price reached a post-pandemic low have seen a 12-fold enhance within the worth of their shareholding.

However I believe the query that shareholders will all be asking themselves is, can this bull run proceed? And by implication, what is going to the share price be on the finish of December.

Let’s have a look.

A crystal ball

Making share price predictions is fraught with difficulties. That’s as a result of historical past’s typically the one instrument out there, but it isn’t essentially a superb information to the long run.

If the Rolls-Royce share price had been to proceed rising by 8.7% a month, it’ll shut 2024 at 698p. However this seems to be a little bit optimistic.

Lately (1 August), the corporate upgraded its earnings expectations for 2024. It’s now forecasting an underlying working revenue for the 12 months ending 31 December (FY24), of £2.1bn-£2.3bn. And free money movement (FCF) of £2.1bn-£2.2bn (beforehand: £1.7bn-£1.9bn).

With many within the Metropolis on vacation, few analysts have had time to digest the excellent news. However JPMorgan shortly upgraded its earnings per share (EPS) forecasts to 18.6p (FY24) and 20.2p (FY25).

The funding financial institution was significantly impressed with the numerous enhance in FCF because it’s anticipated to come back from the advance in profitability, somewhat than from a larger variety of prospects paying prematurely below long-term contract preparations, which had been a priority.

Primarily based on a present (21 August) share price of 493p, JPMorgan’s forecast implies a FY24 ahead price-to-earnings (P/E) ratio of 26.5. That’s on the excessive aspect, particularly for a member of the FTSE 100 the place the typical is presently round half that determine.

Nevertheless, some traders take a look at the PEG ratio to evaluate worth for cash. If JPMorgan’s prediction’s correct, 2024 will see a 35% enhance in EPS. With a P/E ratio of 26.9, the PEG ratio can be 0.76.

That’s near 0.7, the extent under which a share is likely to be thought-about one thing of a cut price.

Illustrious firm

But when the inventory price was 698p, its earnings a number of can be 37.5. This is able to be just like some members of the Magnificent Seven.

Paradoxically, Rolls-Royce’s share price has been rising like that of a tech big somewhat than an organization that’s been round since 1906. However I don’t suppose a valuation at this degree’s justified. And provided that many traders will likely be sitting on some good-looking paper earnings, I’m certain an growing quantity will quickly be tempted to money of their features.

Ultimate ideas

In my view, profitable investing’s about taking a long-term view. Trying 4 months forward is just too brief an funding horizon to be significant. I’m subsequently not going to make any predictions apart from to say that I believe the tempo of progress within the Rolls-Royce share price will quickly begin to gradual.

It would even fall as some traders take a breath. Nevertheless, one other bumper set of outcomes — and an upwards revision in future earnings forecasts — might result in one other bull run.