The Rolls-Royce (LSE: RR.) share price has risen spectacularly over the past two years. For the reason that begin of 2023, it’s surged from 93p to 591p – turning a £5k funding into greater than £30k.

One Metropolis brokerage agency believes the share price can climb a lot increased although. It’s highlighted 820p as a medium-term goal price.

Lofty share price goal

The dealer’s Panmure Liberum, and its analyst Nick Cunningham – who at present has a Purchase ranking on Rolls-Royce – believes the inventory can hit 820p within the subsequent three years.

That concentrate on’s round 39% increased than the present share price. If it was to return to fruition, a £5,000 funding within the firm at the moment may develop to round £6,950.

Cunningham’s bullish on Rolls-Royce for a number of causes. One is that he believes the sturdy civil aviation market will assist progress.

One other is that the corporate has important publicity to the defence trade. He anticipates that increased defence spending within the years forward will increase revenue income and revenue margins.

Cunningham has acknowledged nonetheless, that the prolific revenue progress generated by the FTSE 100 firm in the previous couple of years is unlikely to proceed. His view is that revenue progress’s more likely to “continue to be positive, but also less dramatic.”

Not everybody’s as bullish

It’s price noting that not all brokers are as bullish on Rolls-Royce as Panmure Liberum. Earlier this month, analysts at Citi truly downgraded the inventory from Purchase to Impartial.

Its view was that the inventory’s now approaching ‘fair value’. Nonetheless, it did elevate its goal price from 555p to 641p and that new goal is 8.5% above the present share price.

Ought to I purchase?

Is it price shopping for some Rolls-Royce shares for my portfolio at the moment given Panmure Liberum’s 820p goal? It implies share price progress of practically 12% a yr, which might be a wonderful return over the medium time period.

Properly, there’s rather a lot I like about Rolls-Royce from an funding perspective at the moment. I like the truth that the corporate has publicity to a number of completely different industries together with civil aviation, defence, and nuclear power.

I additionally like administration’s laser centered on effectivity. The earnings progress generated by CEO Tufan Erginbilgiç lately has been very spectacular.

I simply can’t get snug with the inventory’s valuation at the moment nonetheless. With the consensus earnings per share (EPS) forecast for 2025 sitting at 21p, the forward-looking price-to-earnings (P/E) ratio’s 28.

That’s practically as excessive because the P/E ratio on tech inventory Nvidia! And to my thoughts, it provides plenty of threat.

If top-line progress was to sluggish, or prices got here in increased than anticipated, the share price may take a success. In the end, there’s no margin of security at that earnings a number of.

So I’m not going to chase Rolls-Royce shares right here. With the valuation’s so excessive, I’m going to give attention to different funding alternatives.