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Company Rolls-Royce Holdings (LSE: RR.) wipe the floor with BAE Systems (LSE: BA.) share price in the past two years, up 500% compared to 55%.
But it’s easy to forget how much the price of Rolls fell before all this happened.
In five years, the price of BAE has increased by 125%. But after its biggest slump in the 2020 stock market crash, Roll’s shares are up only 110% overall.
Price comparison
I’ve been paying close attention to the balance of these two, and what the magicians are planning for them.
On some key measures, BAE looks like the best to consider even after that excellent five-year performance.
Experimentation teaches me an important lesson as well. If we compare these today, we are looking at two very different companies than five years ago.
So we need to forget what we knew. We should put the two-year boom from Rolls down as a fact of the past and nothing more (and certainly not a guide to future performance). And see how the two meet now.
Head to head
The following table shows how analysts see earnings per share (EPS), price-to-earnings (P/E) ratios, and dividends for the two companies over the next three years.
| Company | BAE Systems | Rolls-Royce |
| EPS growth 2024 | +8.3% | -38.3% |
| P/E 2024 | 19.8 | 30.5 |
| Dividend yield in 2024 | 2.5% | 1.0% |
| Dividend cover 2024 | 2.0x | 3.4x |
| EPS growth 2025 | +12.4% | +12.9% |
| P/E 2025 | 17.6 | 26.9 |
| Dividend yield in 2025 | 2.7% | 1.2% |
| Dividend cover 2025 | 2.1x | 3.1x |
| EPS growth 2026 | + 11.3% | +15.0% |
| P/E 2026 | 15.9 | 23.4 |
| Dividend yield in 2026 | 3.0% | 1.5% |
| Dividend cover 2026 | 2.1x | 2.8x |
How do they stack up
Looking at those numbers, we can see that Rolls-Royce is set to record a fall in earnings this year. It should return to growth next year. But even so, in 2026 we would not see EPS return to the level of 2023.
BAE, meanwhile, should easily beat Rolls in three-year earnings growth to 2026.
BAE is far ahead in the equity market. Rolls recently returned to that game, with the remaining cover in favors. A few years down the line, I could see them both neck and neck.
Where BAE does well is in those P/E ratios. The stock looks better priced for that result, with potential upside built into Rolls-Royce’s share price.
Look at that bill
But this is where Rolls-Royce excels, in a way I didn’t think possible a few years ago.
Total debt is forecast to rise to £6.3bn in BAE this year, and decline slightly to £6.0bn in 2026. Rolls-Royce, by contrast, looks set to return to net income. Debt fell to just £0.8bn over the course of this year.
Can I buy?
This year, the two enjoyed the best feelings that kept them flying. But I’ll give up on both for now, and hope for better buying opportunities ahead.
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