Rentokil Initial (LSE:RTO) - Share price, News & Analysis

Q: What is the Fair Price of RTO when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

RTO (£5.42) is trading above our estimate of [[fair value]] (£2.87)

RTO fundamental analysis
Snowflake Score
Valuation	1/6
Future Growth	4/6
Past Performance	3/6
Financial Health	2/6
Dividends	0/6

RTO Stock Overview

Rentokil Initial plc, together with its subsidiaries, provides route-based services in North America, the United Kingdom, rest of Europe, Asia, the Pacific, and internationally.

Rewards

Earnings are forecast to grow 11.57% per year

Risk Analysis

Debt is not well covered by operating cash flow

Rentokil Initial Competitors

Serco Group

LSE:SRP

UK£2.1b

Mitie Group

LSE:MTO

UK£1.1b

Renewi

LSE:RWI

UK£624.5m

RPS Group

LSE:RPS

UK£308.4m

Price History & Performance

Summary of all time highs, changes and price drops for Rentokil Initial
Historical stock prices
Current Share Price	UK£5.42
52 Week High	UK£6.62
52 Week Low	UK£4.41
Beta	0.39
1 Month Change	8.91%
3 Month Change	3.12%
1 Year Change	-2.34%
3 Year Change	20.41%
5 Year Change	89.97%
Change since IPO	522.53%

Recent News & Updates

Jun 05

Should You Be Adding Rentokil Initial (LON:RTO) To Your Watchlist Today?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story...

Shareholder Returns

	RTO	GB Commercial Services	GB Market
7D	0.07%	0.09%	0.5%
1Y	-2.3%	2.4%	-6.8%

Return vs Industry: RTO underperformed the UK Commercial Services industry which returned 2.3% over the past year.

Return vs Market: RTO exceeded the UK Market which returned -5.8% over the past year.

Price Volatility

Is RTO's price volatile compared to industry and market?
RTO volatility
RTO Average Weekly Movement	3.9%
Commercial Services Industry Average Movement	5.0%
Market Average Movement	5.4%
10% most volatile stocks in GB Market	10.7%
10% least volatile stocks in GB Market	2.7%

Stable Share Price: RTO is less volatile than 75% of UK stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: RTO's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1903	46,000	Andy Ransom	https://www.rentokil-initial.com

Rentokil Initial plc, together with its subsidiaries, provides route-based services in North America, the United Kingdom, rest of Europe, Asia, the Pacific, and internationally. It offers a range of pest control services for rodents, and flying and crawling insects, as well as other forms of wildlife management for commercial and residential customers. The company also provides hygiene services, including the provision and maintenance of products, such as soap and hand sanitizer dispensers, hand dryers, air care and purification, cubicle and surface sanitizers, feminine hygiene units, toilet paper dispensers, and floor protection mats.

Rentokil Initial Fundamentals Summary

How do Rentokil Initial's earnings and revenue compare to its market cap?
RTO fundamental statistics
Market Cap	UK£10.04b
Earnings (TTM)	UK£268.20m
Revenue (TTM)	UK£3.07b

37.4x

P/E Ratio

3.3x

P/S Ratio

Is RTO overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
RTO income statement (TTM)
Revenue	UK£3.07b
Cost of Revenue	UK£684.50m
Gross Profit	UK£2.39b
Other Expenses	UK£2.12b
Earnings	UK£268.20m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Mar 16, 2023

Earnings per share (EPS)	0.14
Gross Margin	77.73%
Net Profit Margin	8.72%
Debt/Equity Ratio	248.1%

How did RTO perform over the long term?

See historical performance and comparison

Dividends

0.9%

Current Dividend Yield

46%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is RTO undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

1/6

Valuation Score 1/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for RTO?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for RTO. This is calculated by dividing RTO's market cap by their current preferred multiple.
What is RTO's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	UK£10.04b

RTO key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	3.7x
Enterprise Value/EBITDA	19.3x
PEG Ratio	3.2x

Price to Earnings Ratio vs Peers

How does RTO's PE Ratio compare to its peers?

RTO PE Ratio vs Peers

The above table shows the PE ratio for RTO vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	27.4x
SRP Serco Group	13x	8.1%	UK£2.1b
MTO Mitie Group	34.5x	53.2%	UK£1.1b
RWI Renewi	9.9x	11.0%	UK£624.5m
RPS RPS Group	52.3x	32.0%	UK£308.4m
RTO Rentokil Initial	37.4x	11.6%	UK£10.0b

Price-To-Earnings vs Peers: RTO is expensive based on its Price-To-Earnings Ratio (37.4x) compared to the peer average (27.4x).

Price to Earnings Ratio vs Industry

How does RTO's PE Ratio compare vs other companies in the GB Commercial Services Industry?

Price-To-Earnings vs Industry: RTO is expensive based on its Price-To-Earnings Ratio (37.4x) compared to the UK Commercial Services industry average (30.2x)

Price to Earnings Ratio vs Fair Ratio

What is RTO's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

RTO PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	37.4x
Fair PE Ratio	39.5x

Price-To-Earnings vs Fair Ratio: RTO is good value based on its Price-To-Earnings Ratio (37.4x) compared to the estimated Fair Price-To-Earnings Ratio (39.5x).

Share Price vs Fair Value

What is the Fair Price of RTO when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: RTO (£5.42) is trading above our estimate of fair value (£2.87)

Significantly Below Fair Value: RTO is trading above our estimate of fair value.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.

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Future Growth

How is Rentokil Initial forecast to perform in the next 1 to 3 years based on estimates from 13 analysts?

Future Growth Score

4/6

Future Growth Score 4/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

11.6%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: RTO's forecast earnings growth (11.6% per year) is above the savings rate (0.9%).

Earnings vs Market: RTO's earnings (11.6% per year) are forecast to grow faster than the UK market (9.9% per year).

High Growth Earnings: RTO's earnings are forecast to grow, but not significantly.

Revenue vs Market: RTO's revenue (4.8% per year) is forecast to grow faster than the UK market (4% per year).

High Growth Revenue: RTO's revenue (4.8% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: RTO's Return on Equity is forecast to be high in 3 years time (22.2%)

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Past Performance

How has Rentokil Initial performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

-15.4%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: RTO has high quality earnings.

Growing Profit Margin: RTO's current net profit margins (8.7%) are higher than last year (8.7%).

Past Earnings Growth Analysis

Earnings Trend: RTO's earnings have declined by 15.4% per year over the past 5 years.

Accelerating Growth: RTO's earnings growth over the past year (3.8%) exceeds its 5-year average (-15.4% per year).

Earnings vs Industry: RTO earnings growth over the past year (3.8%) underperformed the Commercial Services industry 139.1%.

Return on Equity

High ROE: RTO's Return on Equity (18.6%) is considered low.

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Financial Health

How is Rentokil Initial's financial position?

Financial Health Score

2/6

Financial Health Score 2/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: RTO's short term assets (£3.2B) exceed its short term liabilities (£1.7B).

Long Term Liabilities: RTO's short term assets (£3.2B) do not cover its long term liabilities (£3.4B).

Debt to Equity History and Analysis

Debt Level: RTO's net debt to equity ratio (83%) is considered high.

Reducing Debt: RTO's debt to equity ratio has increased from 176.8% to 248.1% over the past 5 years.

Debt Coverage: RTO's debt is not well covered by operating cash flow (13.8%).

Interest Coverage: RTO's interest payments on its debt are well covered by EBIT (14.6x coverage).

Balance Sheet

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Dividend

What is Rentokil Initial current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

0.89%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: RTO's dividend (0.89%) isn’t notable compared to the bottom 25% of dividend payers in the UK market (1.87%).

High Dividend: RTO's dividend (0.89%) is low compared to the top 25% of dividend payers in the UK market (5.15%).

Stability and Growth of Payments

Stable Dividend: RTO is not paying a notable dividend for the UK market, therefore no need to check if payments are stable.

Growing Dividend: RTO is not paying a notable dividend for the UK market, therefore no need to check if payments are increasing.

Earnings Payout to Shareholders

Earnings Coverage: RTO is not paying a notable dividend for the UK market.

Cash Payout to Shareholders

Cash Flow Coverage: RTO is not paying a notable dividend for the UK market.

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Management

How experienced are the management team and are they aligned to shareholders interests?

6.6yrs

Average management tenure

CEO

Andy Ransom (59 yo)

8.83yrs

Tenure

UK£6,001,100

Compensation

Mr. Andrew M. Ransom, also known as Andy, has been the Chief Executive Officer of Rentokil Initial plc since October 1, 2013. Mr. Ransom serves as Non-Executive Director and Senior Independent Director of...

CEO Compensation Analysis

Compensation vs Market: Andy's total compensation ($USD7.23M) is above average for companies of similar size in the UK market ($USD5.14M).

Compensation vs Earnings: Andy's compensation has increased by more than 20% in the past year.

Leadership Team

Experienced Management: RTO's management team is seasoned and experienced (6.6 years average tenure).

Board Members

Experienced Board: RTO's board of directors are considered experienced (4.6 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/08/06 00:00
End of Day Share Price	2022/08/05 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31