It was the best performing stock in the ranks of the FTSE 350 by some distance in 2023, and aircraft engine-maker Rolls-Royce’s (RR.) share price has started 2024 in fine fettle to trade above pre-pandemic levels.

There is no doubt Tufan Erginbilgiç has brought real seriousness to the business of turning around a company which had been struggling for years even before Covid grounded planes around the world.

However, starting with an anticipated trading update on 23 May alongside the company’s AGM, Erginbilgiç may need to demonstrate more tangible evidence of progress to sustain the momentum.

There were just one or two warning signs in February’s better-than-expected 2023 results which may give the market pause for thought. Operating profit may have come in 28% ahead of expectations at £917 million, but as analysts at Berenberg observe just £40 million of this £199 million beat came from the cornerstone civil aerospace operation.

This is not to be churlish – progress has undoubtedly been made, particularly on cash flow which was a bugbear of investors for years.

Though again, as the cash piles up, it may not be sustainable for the company to put off dividend payments if it is to keep shareholders on side.

The valuation is looking somewhat stretched having more than quadrupled since Erginbilgiç took charge. Based on consensus forecasts the shares trade on 28 times 2024 earnings.

Headline metrics and price-to-earnings ratios for a single year might not tell the whole story, particularly when a company is the midst of a turnaround. However, work by my colleague Ian Conway on Rolls’ valuation, accounting for the historical context, suggests the stock is trading some way above its long-term average in terms of the PE.

A few weeks ago this column applauded the management of Currys (CURY) for resisting takeover interest, so it is gratifying to see that in the wake of the latest upgrade from the company the shares are now trading materially above suitor Elliott Partners’ highest bid.

An interesting contrast can be drawn with another business batting off approaches – Anglo American (AAL). Currys was already in the process of getting its act together when Elliott made its move earlier this year – selling off a non-core part of the business to bolster the balance sheet and putting new management into the underperforming Nordics business.

However, it’s only in response to BHP’s (BHP) all-share merger proposals that Anglo American has suddenly decided now is the time to offload major parts of the group. Which begs the question: why weren’t these plans already in train if they are the right thing for shareholders?

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