The Rolls-Royce Holdings (LSE: RR.) share price hit a 52-week high of 592.2p in November, extending its record-breaking run by yet another month.

And never mind the 80% share price rise in 2024, we’re up 650% since the latest climb got going in September 2022.

How much have I made from Rolls-Royce shares? Not a penny, and it’s all down to one of my favourite investing quotes.

It’s not one of Warren Buffett‘s. No, it’s from an old friend who once observed: “You sure know how to buy shares that have already gone up“.

Momentum or fundamentals?

There’s another saying: “The trend is your friend until the bend at the end“.

Momentum can push share prices to dizzying heights. But trying to trade on that means having some way to guess when the final bend might come.

I can’t do it, so I look at fundamentals instead. But you know what? Fundamentals also make me think the Rolls-Royce share price could have further to go. Forecasts show earnings per share climbing from 2025 onwards. That’s after a fall in 2024 though, and forecasts are often wrong. So caution’s needed.

Valuation not too high?

Estimates put Rolls shares on a high price-to-earnings (P/E) ratio of 31. But it could fall to under 24 by 2026. Meanwhile, Tesla has a forward P/E of 162, with Nvidia on a relatively modest 51. Does that perspective mean Rolls-Royce is cheap? Or that US investors have taken leave of their senses?

To get some idea, I need to think about where the earnings growth Rolls-Royce needs might come from. In November’s trading update, CEO Tufan Erginbilgiç said: “Continued good performance year to date gives us further confidence in the delivery of our 2024 guidance.”

Trading outlook

At interim results time, Rolls raised its full-year guidance, saying: “We now expect underlying operating profit between £2.1bn and £2.3bn and free cash flow between £2.1bn and £2.2bn.“

Key for me in the half was a 14% underlying operating margin, up from 9.7% a year previously.

But the Rolls-Royce recovery isn’t just about the aviation business getting going again and volumes of its aero engines getting back to normal. No, there’s new technology in the pipeline, which I reckon could give Rolls a competitive advantage in the coming years.

Energy changes

Much of it is centred on reduced carbon, as the firm’s “developing a highly efficient hydrogen reciprocating engine which is partly funded by the German government“.

In power generation, Rolls “won major Battery Energy Storage Systems (BESS) contracts, including a contract with Latvia to install one of the largest BESS in the EU.“

It’s also pioneering small modular nuclear reactors, and has made the shortlist for a Swedish power company for a fleet of them.

I’m not buying

So I’m bullish about Rolls-Royce and its leading-edge technology. But I won’t buy now. I just think the high valuation (by UK standards) holds too much risk for my liking.

And I’ll never forget what that old friend told me. Still, if the price should fall…