Rolls-Royce Share: Buyback Boosts
Rolls-Royce shares have surged by over 80% since January, now trading just below their 52-week high. The company’s latest £200 million share buyback programme, announced this week, follows a year of strong financial gains and growing investor confidence. Yet, despite the rally, questions remain about whether the stock’s high valuation is justified.
Under CEO Tufan Erginbilgiç, Rolls-Royce has undergone a sharp turnaround since early 2023. Half-year profits jumped by 50%, while the share price climbed from around £1 to over £11. His leadership has driven operational improvements, helping the company complete a £1 billion buyback in November 2023 and launch a fresh £200 million programme starting January 2, 2026.
The company’s financial strength has also won recognition from credit agencies. Moody’s upgraded Rolls-Royce to investment grade (Baa1) in November, a move likely to cut refinancing costs and boost flexibility. Bank of America has since raised its price target to 1,615 pence, pointing to stronger-than-expected free cash flow and shareholder returns.
Market optimism is backed by broader industry trends. Rising European defence budgets and a robust civil aviation cycle provide long-term support for Rolls-Royce’s business. Still, the stock’s price-to-earnings ratio sits at around 56x—far above historical levels—raising doubts about whether the rally can continue.
Attention now turns to the full-year results, due in late February. Investors will be watching closely to see if the numbers justify the high valuation and set the stage for further gains.
The new buyback programme signals management’s belief in sustained cash flow and a solid balance sheet. With defence and aviation sectors offering tailwinds, Rolls-Royce’s outlook appears strong. However, the upcoming earnings report will be key in determining whether the current share price can hold its momentum.
