It’s up 1,000% in 5 years, but the UK government could send Rolls-Royce shares even higher.

Rolls-Royce (LSE:RR) shares are up exactly 1,000% in five years, according to my data provider. There is a good balance in that return!

However, the FTSE 100 the stock has been out of whack lately, down 18% since early March. This is due to a combination of factors, including rising jet fuel costs, canceled flight routes, and strategic guidance from a rival engine maker. GE Aerospace.

Incoming AGM

Undoubtedly, what the stock needs is good motivation. Rolls’ annual general meeting (AGM) will be held tomorrow (30 April), so we may get a trading update confirming whether guidance for the full year is still on track (or not).

After that, the next big impact will be the company’s half-year report, due in late July. Stocks tend to see a lot of action in one way or another after short-term results (usually higher in recent years).

As a reminder, Rolls is targeting full-year underlying operating profit of £4bn–£4.2bn, with free cash flow of £3.6bn–£3.8bn.

The company has become adept at setting desirable goals and then breaking them down. But that may be difficult due to the difficult backdrop of restricted airspace and canceled flights.

SMRs are big business

Obviously, the word nearby looks tricky and this adds to the risk. However, as a shareholder with a vested interest in the next decade, I remain bullish, especially on small scale reactors (SMRs). Or small nuclear reactors.

If Rolls manages to become a global leader in this space, as it expects, the opportunity could be huge. How big is it? However, the International Energy Agency (IEA) sees total SMR capacity reaching 120 GW by 2050, with more than 1,000 SMRs deployed.

Cumulative investment could reach $670bn by 2050!

Now, this is the IEA’s bullish scenario, but the base case is an SMR capacity of up to 40 GW. CEO Tufan Erginbilgic estimates 400 SMRs by 2050.

Any way you slice it, this is a growing market. Each unit is reported to cost around £2bn–£3bn, assuming the technology can work at scale (this has yet to be proven).

Beating the drum

So, it was encouraging to learn last week that UK government figures were in Europe trying to consolidate the business of Roll-made SMRs. In accordance with The TelegraphBusiness Secretary Peter Kyle has been talking to Sweden and other European countries.

Rolls-Royce SMR has already signed contracts with the UK and the Czech Republic to build mini nukes. In doing so, it is the only company with multiple contractual obligations to deliver SMR units in Europe.

“I am in advanced discussions with Sweden. I also drum with other countries in Europe and further afield,” said Kyle The Telegraph.

To be fair, Rolls is already the last in Sweden once GE Vernova to provide its SMR technology to the energy giant Vattenfall. But now there is talk that Germany is considering SMRs to increase its autonomous capability due to the 2026 disruption.

If the Rolls-Royce SMR can attract orders from other major European countries, especially Germany, the stock should grow decently.

A chance to buy a dip?

Even after falling 18%, the stock is not cheap. We looked at 29 times the income.

But for investors willing to look beyond near-term uncertainty, I think Rolls is worth a closer look.