Rolls-Royce investors ‘have made a mint’ as shares near £10

FTSE 100 darling Rolls-Royce is on the cusp of hitting its latest impressive milestone as its shares edge closer to being worth £10 each.

The Derby-headquartered giant has enjoyed an almost unprecedented run of success on the London Stock Exchange since the low of the Covid-19 pandemic.

The company recently became worth more than £80bn and is now on track to see its shares change hands for £10 for the first time in its history in the next few weeks.

When the 1,000p price is achieved, it will be double what Rolls-Royce’s shares were trading at in September 2024.

The group’s share price has been boosted in recent weeks after it was named the winning bidder for UK small nuclear reactors.

Rolls-Royce is now the fifth most valuable member of the FTSE 100 after recently overtaking British American Tobacco.

The only companies ahead of it in terms of market capitalisation are AstraZeneca, HSBC, Shell and Unilever.

The performance of Rolls-Royce’s shares will be seen as a boost for Chancellor Rachel Reeves who is attempting to encourage more people in the UK to invest in UK stocks.

‘A rare good news story in a market clouded by uncertainty’

Reacting to the news that Rolls-Royce’s share price is nearing its latest milestone, AJ Bell investment analyst Dan Coatsworth lifted the lid on why the FTSE 100 giant is performing so well.

Coatsworth said: “Rolls-Royce is within a whisker of hitting £10 a share which is quite an achievement considering it was trading below £1 only three years ago.

“Investors have made a mint and they’re still holding out for more, given how the shares keep rising.

“Rolls-Royce is a rare good news story in a market clouded by uncertainty. Its business turnaround efforts have been a great success, it is winning more contracts and has a tailwind from many governments committing to greater defence spending.

“Upgrades to earnings forecasts can help to drive up a company’s share price and Rolls-Royce is flying high.

“Whereas a lot of companies are suffering from earnings downgrades amid uncertainty around the global economy and tariffs, Rolls-Royce’s earnings estimates keep going up.

Rolls-Royce ‘under pressure to keep delivering good news’

However Coatsworth did issue a warning over what might happen to Rolls-Royce’s share price if its financial performance does not continue to meet expectations.

He said: “A year ago, the consensus earnings forecast for Rolls-Royce’s 2026 earnings per share was 22.32p; now it is 28.93p.

“Another key driver for the shares is that investors have been prepared to pay a higher multiple of earnings to own the stock.

“That’s the definition of a re-rating and Rolls is now trading on 36.3 times next 12 months’ earnings versus 24.3-times last October.

“This re-rating can’t go on indefinitely and it puts pressure on Rolls-Royce to keep delivering good news.

“The danger with highly rated stocks is that their shares can fall back quickly if earnings are simply in line with expectations.

“They have to keep beating expectations to warrant trading on a premium rating such as 36 times forward earnings.”