There’s no denying it Rolls-Royce (LSE:RR.) shares were a key factor FTSE100 growth over the last few years. The stock price has gone parabolic and continues to rise despite growing fears of a correction.

But here’s a puzzle that keeps seasoned investors up at night. Despite growing 111% last year, earnings grew eight times faster than the share price. At first glance, this sounds brilliant – the printing company benefits, although the price lags behind. Dig deeper and you’ll discover that the situation is a bit more intricate.

In my opinion, the numbers tell a contradictory story. Underlying operating profit and cash flow are expected to exceed £3 billion in fiscal 2025, and engine flight hours are back to 109% of pre-pandemic levels in 2019. Meanwhile, earnings per share (EPS) have almost doubled in the first half of 2005, so there’s no questioning the company’s exceptional performance in recent years.

So why worry?

This is where it gets uncomfortable. These impressive gains are now capitalized on a price-to-earnings (P/E) ratio of 41.7, almost three times the company’s historical average. The average 12-month price target is just 7.8% above today, which is extremely low for a stock that is up 111% in a year. It seems that investors have priced in the recovery and little can surprise them anymore.

For investors focused on retirement, which is what they are used to FTSE100 dividend stocks yielding 5-7%, Rolls-Royce offers almost nothing. The current dividend yield is a paltry 0.87%, with forecasts of 10.6p per share in 2026 and 12p in 2027. Even at these higher levels, the yield is barely above 0.8-1%. To generate significant income, you need to have a significant position – which seems risky given the current valuation.

There is also the matter of £4.9 billion of debt and £2.4 billion of equity. Despite a net cash position of £1 billion, debt remains significant. Plans to buy back £1 billion of shares by the end of 2026 are probably positive given future valuation risks.

So what’s the deal?

I can talk all day about overvaluation and debt, but that doesn’t mean Rolls’ share price won’t rise. Strong cash flow, accumulated order book and good market sentiment will be enough to maintain a sustainable growth trajectory.

But the longer it goes on, the longer it becomes a sustainable price on an increasingly frail foundation. Not through the fault of business itself, but simply because of the laws of economic sustainability. With the share price falling 7% in the last two weeks – the third such occurrence this year – investors are understandably concerned.

So for those willing to take a chance on the long-term growth narrative, Rolls is still worth considering. However, for more value-focused and risk-averse investors like myself, this is unlikely.

Fortunately, the FTSE 100 is full of high-quality, lower-value options that are expected to grow exceptionally in 2026. For investors looking for stable returns without high valuation risk, RELAX, ExperimentAND London Stock Exchange Group you deserve a closer look now.

Whether you choose the income stability or high-risk/high-reward growth route, it always pays to maintain a broadly diversified portfolio. A portfolio structure that includes a variety of stocks from different sectors and geographies helps reduce risk while targeting a mix or market opportunities.