The Rolls-Royce (LSE: RR.) share price has dazzled buyers. It’s up a surprising 870% in three years, and 85% within the final 12 months.

It’s secured a loyal military of followers – I quantity amongst them. The query we’re all asking at present is whether or not Rolls-Royce shares can maintain this up. That’s inevitable, after such a stellar run.

FTSE 100 breakout star

Two Sunday (22 June) newspapers tackled this precise query and delivered very completely different solutions.

The Mail on Sunday warned of potential “turbulent times ahead” because of technical points with the group’s ageing Trent 1000 engines. The Sunday Telegraph took a extra bullish stance, angling on CEO Tufan Erginbilgiç pursuing a brand new period of commercial dominance. So which is it going to be?

Two visions, one inventory

The Trent 1000 engine, which powers Boeing 787s, has lengthy had reliability points. But Rolls-Royce clearly has enormous new development alternatives.

Erginbilgiç now goals to re-enter the short-haul jet engine market after greater than a decade away, taking up Normal Electrical and Pratt & Whitney. That’s a giant market and will repay properly, particularly if he can win contracts with the likes of Ryanair and Wizz Air.

Rolls-Royce additionally main the cost on nuclear energy, with its choice as most well-liked bidder to provide small modular reactors to Nice British Nuclear. That might create tens of hundreds of jobs and drive future export development. However Trent engines are its bread and butter, and bother right here will harm the shares.

Forecasts differ

Analysts aren’t so divided. Among the many 13 giving inventory scores, 10 identify Rolls a Sturdy Purchase. Two say Maintain, and only one says Promote. Nevertheless, they’re extra cautious this could recommend. Brokers have set a one-year median share price goal of 929p. That’s solely 4.5% above at present’s 890p.

So what about me? Personally, I’ve no plans to promote. That mentioned, it’s tempting to financial institution some positive aspects after a run like this. With a price-to-earnings ratio of 44 occasions, the valuation’s wealthy. Eventually, development has to gradual. Any misstep might hit the share price exhausting. If Trent issues flare up once more, I might see a bit of my income vanish.

Civil aerospace’s nonetheless the core enterprise, and it’s extremely cyclical. Local weather dangers, warfare speak or rising gas costs might hit journey, and squeeze revenue from engine upkeep contracts primarily based on miles flown.

Defence is in demand however that’s priced in. The nuclear wager’s thrilling, however unproven.

I nonetheless assume there’s sensible potential right here – with a charismatic chief and a transparent technique. However the actual fireworks could also be over. I’ve my eye on the long run right here. Rolls-Royce actually does have a possibility to place itself as an important British engineering success story. But it’ll undergo bumpy occasions in future, simply because it has up to now. I plan to carry via thick and skinny. Because the dividend recovers, I hope to get some revenue to see me via the skinny occasions

For contemporary buyers, it would make sense to contemplate drip feeding in over time. The long-term story stays compelling, however the quick time period could also be extra turbulent.