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The last time I wrote about Rolls-Royce (LSE:RR) share price in early July. It was around £4.60 then. I concluded that its stock would remain near this mark until the end of 2024.
How wrong I was. Its shares have risen almost 20% since then, with it priced at £5.55 at the time of writing (October 30).
Since the beginning of the year, its shares have risen 86%.
If you had invested in early 2023, you would have made a 495% return.
It is clearly one of the best investments that could have been made during that period.
What has been driving up the stock price?
To explain the share price growth, just look at its half-year results for 2024. Rolls-Royce has been experiencing strong growth for some time. For example, its pre-tax profit has almost doubled to £1.04 billion in the first half of 2024 compared to the same period in 2023.
In addition, the company is involved in exciting projects. The Czech Republic's state utility recently selected Rolls-Royce for its small modular reactor (SMR) programme. This market is expected to be valued at £295 billion by 2043. This shows that the company has greater growth prospects, which will help boost its share price.
This FTSE 250 company could emulate such profitability
The problem with investing in Rolls-Royce at the moment is that it is becoming a riskier investment. It currently trades at a forward price-to-earnings (P/E) ratio of 28, which means its stock is quite expensive.
Because there is already a lot of optimism, its shares could prove fragile in the presence of bad news. For example, a further escalation of conflicts in the Middle East could negatively affect oil prices, which could harm the overall economy and also harm company profits.
That's why I would turn my head towards train line (LSE:TRN).
He FTSE 250 The company has delivered a solid but comparatively much less glamorous return of 20% in 2024.
However, its Forward P/E of 22 makes its shares much cheaper.
But I think there are many other reasons to like the company besides this one.
It should be noted that it is growing very well. In its latest half-year results for FY25, the company saw its net ticket sales rise 14% year-on-year to £3bn. Additionally, this translated into revenue growth of 17% to £229 million.
There is also enormous international potential. This is evidenced by the encouraging growth in Spain and Italy, which recorded an increase in net ticket sales of 23%.
However, I am concerned about the company's dependence on competition from operators. Trainline services become redundant when carrier competition is low. Therefore, if competition in the railway sector decreases, your business could be threatened.
And now what?
Trainline is growing well and is in fact the most downloaded train app in Europe. I also believe that as the shift toward digital train tickets instead of paper tickets continues, the company may see accelerated growth in the future.
That's why I see it generating Rolls-Royce-level returns over the long term. That's why I will also continue buying their shares.
