As with any stock, Rolls Royce (LSE:RR) The share price can fall or rise. I thought the old truth was worth mentioning, because lately it has only gone in one direction – like a rocket headed for the stratosphere. Can it continue?

Rolls-Royce shares have risen 1,200% over the past five years, turning £10,000 into a staggering £130,000 and potentially transforming people’s retirement rates on its own. I was expecting its momentum to decline by now, but it is up 110% over the past 12 months. It still managed to rise 7% in the past month.

But surely this is as good as it gets? The stock is trading at a towering price-to-earnings ratio of 61k before FTSE 100 index It averages around 18. This represents a tremendous amount of future growth, and if earnings disappoint, the stock could collapse as investors bank gains and short-term bandwagon players are halted.

FTSE 100 Growth Monster

I don’t know if that will happen, but any investor who owns this stock, or is considering buying it, will have to accept this risk.

in Motley FoolWe encourage long-term investment. As a general rule, we aim to hold stocks for years. We believe that guessing short-term movements is almost impossible. Try to get smart, and the market will punish you. The true benefits of an investment are measured in decades, not weeks. This gives companies time to grow, and allows reinvested profits to accumulate. Buy and hold also saves trading fees. They add.

So my natural inclination is to keep Rolls-Royce no matter what news it brings. Although I think stocks should slow down from here, and possibly collapse.

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

Risks and rewards

Its energy systems arm is benefiting from the rush to build AI data centers, but if AI is just a bubble, that may end. Peace in Ukraine, in the unlikely event (so far), might strike the defense arm, while the enormous opportunity of small modular reactors or nuclear projects may never materialize. All of these could hit Rolls Royce.

The biggest short-term risk will come on February 26, when Rolls-Royce reports full-year 2025 results. It expects underlying operating profit of between £3.1 billion and £3.2 billion, and free cash flow of between £3 billion and £3.1 billion. Any deficiency can be severely punished. On the other hand, if the company exceeds targets, given CEO Tuvan Erginbilgic’s excellent track record, the stock could certainly rise again.

Although the trailing P/E ratio seems extreme, the forward P/E ratio is 20.7, which is less challenging. Is it worth considering today? With a short-term view, I would say no. Quick profits have been made. But in the long run, I would say yes. This is a great company and has a lot to offer. I own a Rolls Royce and have no plans to sell. But it may still crash.