As with all shares, Rolls-Royce (LSE:RR) the share price can fall as well as rise. I thought it was worth telling this venerable truth, because recently it has only gone in one direction – like a rocket shot into the stratosphere. Can this last?

Over the last five years, Rolls-Royce shares have risen by 1,200%, turning £10,000 into a spectacular £130,000 and potentially completely changing people’s pensions. I would have expected this trend to leisurely down, but it has increased by 110% over the last 12 months. Last month it managed to grow by 7%.

But is this really as good as it gets? The stock is trading at a breathtaking price-to-earnings ratio of 61, putting it ahead of the stock market FTSE100 averaging around 18. That’s an awful lot of future upside in the price, and if earnings disappoint, the stock could fall on investor bank gains and short-term trend gains.

FTSE 100 growth monster

I don’t know if this will happen, but any investor who owns or is considering purchasing these shares must accept the risk.

On A motley foolwe encourage long-term investing. As a rule, our goal is to hold shares for years. We believe that predicting short-term movements is almost impossible. Try to be sharp and the market will punish you. The real benefits of investing are measured in decades, not weeks. This gives companies time to develop and allows for the accumulation of reinvested dividends. Buying and holding also saves you on transaction fees. They add up.

So my natural bias is to hold onto my Rolls-Royce no matter what the news brings. Although I think stocks need to leisurely down from here and may even go lower.

As with any stock, there are risks. Rolls-Royce relies on a elaborate, global supply chain of engines and aerospace components. Delays, shortages of key parts or problems at key suppliers can harm production and revenues. Technical or operational failures pose a risk, as we saw with the failed Trent 1000 engines. Any slowdown in passenger air travel could also impact engine sales and maintenance revenues.

Risks and rewards

Its Power Systems division is benefiting from the rush to build artificial intelligence (AI) data centers, but if AI becomes a bubble, it could end. Peace in Ukraine, in the unlikely event (for now), could hit the defense arm, while the enormous opportunities presented by miniature modular reactors or nuclear projects may never materialize. All this could hit Rolls-Royce.

The biggest near-term risk will come on February 26, when Rolls-Royce publishes its full-year 2025 results. It expects underlying operating profit to be between £3.1 billion and £3.2 billion and free cash flow to be between £3 billion and £3.1 billion. Any deficiencies may be severely punished. On the other hand, if the company exceeds its targets, and given CEO Tufan Erginbilgiç’s stellar track record, it certainly will, the company’s stock could climb even higher.

While the trailing P/E looks extreme, the forward P/E is 20.7, which is less discouraging. Is it worth considering this today? Short term, I’d say no. Quick profits were made. But in the long run, I would say yes. This is a great company that has a lot to offer. I have a Rolls-Royce and have no plans to sell it. But it may still crash.