3 reasons why the Rolls-Royce share price will rise over the next decade

Rolls-Royce (LSE:RR) share price FTSE100‘s biggest achievements of the last 12 months. But I think it might not have been done yet.

CEO Tufan Erginbilgiç highlighted three lines of opportunity for the company in a recent interview with Nicolai Tangen. If earnings continue to grow, I expect the stock to move higher.

sustainable fuel

According to Erginbilgiç, the aviation industry is moving towards sustainability. More specifically, the next 20 years will include the transition to sustainable aviation fuel (SAF).

In such a situation, Rolls-Royce will be in a strong position. Unlike its competitors, all of the company’s engines are currently 100% SAF compliant.

One problem is that SAF is two to seven times more expensive than jet fuel. This makes airlines reluctant to use this method unless encouraged or required by regulations.

Therefore, Rolls-Royce needs corporate support to navigate this growth opportunity. But focusing on global emissions targets means this could be a realistic possibility.

narrow body aircraft

Another important way is to expand the market in which Rolls-Royce sells its engines. The company has been focusing only on wide-body aircraft since 2011.

Erginbilgiç, on the other hand, sees the growing narrow body market as a potential opportunity. The company’s plan is to participate through a partnership with a manufacturer such as: Airbus.

Rolls-Royce believes UltraFan technology can increase engine efficiency by 10% to 15%. This can turn into a significant opportunity for growth.

A partnership means trusting another company. With Boeing’s Dealing with quality issues and Airbus struggling to expand production could pose a risk to this strategy.

Small nuclear reactors

Nuclear energy is becoming an increasingly important energy source energyespecially in Europe. If this turns out to be the case, Rolls-Royce will be in a strong position to benefit.

Small modular reactors that are more flexible and cheaper than their larger counterparts could be important. And the company is a leader in this field.

The technology is not new, but its commercialization involves a three-stage approval process. Currently, the only company to reach the second stage is Rolls-Royce.

It will take time to establish the supply chain here. But given net zero targets and energy security, this could be a significant source of growth over the next 10 years.

Is it too late to buy shares?

Given that the Rolls-Royce share price has risen 263% in the last 18 months, it’s natural for investors to wonder whether it’s past time to buy the stock.

Obviously it’s better to buy any stock at £1.51 rather than £5.48, but the Rolls-Royce CEO still sees plenty of opportunity ahead. And if the company continues to grow, I expect the stock to follow suit, so it might be worth considering.