The Rolls-Royce share price is up 65% in 3 months. Too late to buy?

Like the famous engineer’s own jet engines, the Rolls-Royce (LSE: RR) share price has shown serious strength lately. But after rising so strongly in recent months, has this ‘fallen angel’ stock gone too far, too soon? And with RR shares trading close to their 2021 high, is it too late for me to jump aboard?

The Rolls-Royce share price collapses

If I needed a poster boy for the damage caused to the economy by Covid-19, I could easily opt for Rolls-Royce. In fact, this stock has had such a tough time that RR could also stand for ‘Roller-coaster Ride’. Over three years ago, the Rolls-Royce share price was flying high. On 3 August 2018, shares in the aerospace and defence company closed at 375.43p, close to a five-year high. However, the stock then went into decline, closing out 2019 at 234.45p after falling almost two-fifths (-37.6%) in 17 months. Alas, thanks to the coronavirus, the worst was yet to come.

As Covid-19 infections spread worldwide, governments closed their borders and imposed lockdowns. As a result, the Rolls-Royce share price imploded in 2020. Almost unbelievably, RR stock crashed to a lifetime low of just 34.59p on 2 October 2020. At this point, this FTSE 100 champion’s shares had collapsed by almost six-sevenths (-85.2%) in 2020. But this brutal beatdown finally came to an end as RR stock roared back to life.

It’s been a great 12 months for RR

As I write, the Rolls-Royce share price stands at 142.1p, more than four times its 2020 low (+310.8%). Also, RR is up 88.2% over the past year and ahead 35.2% over six months. Remarkably, since closing at 87p on Monday, 19 July, the stock has soared by almost two-thirds (+63.4%) over three months. Over one month, it’s leapt by almost a quarter (+23%). Right now, RR could stand for ‘Rocket Ride’.

However, since hitting its 2021 intra-day high of 148.45p on Monday, 27 September, the Rolls-Royce share price has taken a breather. Today, it’s 6.35p (-4.3%) off this recent high. So, is it too late to get on board, or could there be more gains to come?

A long road to recovery?

Momentum investors who boarded the RR bandwagon in July are sitting pretty today. But, as a veteran value investor, I suspect that the Rolls-Royce share price may have risen too far, too fast recently. The problem with momentum trading is that when euphoria wears off, valuations can look very punchy indeed. Today, RR is valued at £11.9bn, but the group also has up to £4bn of net debt weighing it down. Then again, the firm is bolstering its balance sheet with sales, as well as winning new contracts.

The main issue for me is that, having survived a threat to its very existence, Rolls-Royce is a weaker company today than it was pre-Covid-19. I don’t own RR shares, but would I buy at the current Rolls-Royce share price? For me, the answer has to be a firm no. I’m bearish on the stock for now — until I see the next set of results, at least. I could easily be wrong. If air passenger miles skyrocket, so too would RR’s service revenues and cash flow. And if we get the coronavirus under control, air travel could boom once again. These positive outcomes could both be great news for long-suffering Rolls-Royce shareholders!

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.