Five years ago, a £20,000 investment in Rolls-Royce shares would today be worth close to £300,000, dwarfing the FTSE 100’s 49% gain over the same period.
What makes that performance all the more striking is that the analyst community simply did not see it coming, with the consensus view on the stock sitting at Hold throughout much of that period.
Rolls-Royce was in serious difficulty five years ago, burning through cash, weighed down by heavy debt, and hammered by pandemic-related travel restrictions that gutted its revenues.
The recovery came through several converging forces, including the return of engine flying hours after Covid-19, rising defence budgets across NATO members, and a sweeping transformation programme led by chief executive Tufan Erginbilgiç.
Those improvements drove stronger cash flows, which the company used to repair its balance sheet, cutting interest costs and creating a compounding effect that pushed profitability significantly higher.
A major driver of the share price gain was not just business fundamentals but a dramatic re-rating, with the stock moving from a price-to-sales multiple of 0.8 to 5.39, a 10-year high aligned with operating margins also at their widest in a decade.
The analyst consensus on Rolls-Royce has now shifted to Strong Buy, but with elevated multiples and unusually wide margins, the easy recovery trade is long gone and investors are now navigating uncharted territory.
The more interesting question for growth-minded investors may be whether another unloved FTSE 100 company is now sitting in a similar position to where Rolls-Royce stood five years ago.
FTSE 100 distributor Bunzl (LSE: BNZL) shares several characteristics with early-recovery Rolls-Royce, including cyclical headwinds, operational setbacks, and a valuation trading well below its 10-year average price-to-earnings multiple.
The company has faced a difficult stretch, with deflation and destocking weighing on organic growth, and operational errors tied to its shift toward own-branded products creating specific challenges across its North American business.
However, there are signs the picture is improving, with organic sales growth beginning to pick up and the firm’s June update confirming its North American business is “largely restored” after its problems last year.
Beyond the cyclical recovery, Bunzl also carries an active acquisition pipeline that could add an additional layer of growth on top of any organic improvement in trading conditions.
The current analyst consensus on Bunzl is Neutral, a strikingly familiar position for investors who recall that Hold was also the prevailing view on Rolls-Royce shares five years before its extraordinary run.
Risks remain real and should not be dismissed lightly, including the possibility of a US recession, a strategic misstep, or a difficult year for the acquisition pipeline that has underpinned Bunzl’s long-term growth story.
The lesson from the Rolls-Royce story is not that analysts are always wrong, but that the most significant returns often emerge precisely when the crowd remains unconvinced and contrarian patience proves its worth.