Latest news with #RentokilInitial
Yahoo
11-05-2025
- Business
- Yahoo
This FTSE 250 stock has returned over 300% since 2020
Investors who are able to look past a company's short-term challenges can generate great returns. Over the last five years, one FTSE 250 stock has been a great illustration of this. The Premier Foods (LSE:PFD) share price has gone from 45p in 2020 to over £2 today. And there's an important lesson for investors in this. Premier Foods isn't a particularly dynamic business. It manufactures a range of branded and own-label packaged foods, ranging from cakes to cooking sauces. It's the type of company where returns tend to be steady, rather than spectacular. But over the last five years, both the business and the stock have done incredibly well. Sales have increased, margins have widened, and the company has reinstated its dividend. And this has caused the share price to rise sharply. One of the key improvements has been the firm's balance sheet. Since 2020, long-term debt has decreased from £501m to £326m, resulting in lower interest payments and higher profits. This, however, looks unlikely to continue. The company is now in a strong financial position, so I'm wary of how much scope there is for future improvements on this front. As a result, I'm looking around for the next major opportunity. And there's a stock that's been catching my eye recently as one to take a closer look at. Rentokil Initial (LSE:RTO) has a lot in common with Premier Foods. It operates in an industry where demand is relatively stable and it has a significant competitive position. Like Premier Foods in 2020, Rentokil also has a lot of debt on its balance sheet. Long-term borrowings are roughly double where they were five years ago. This, however, is the result of a big acquisition in 2022. And I think as the debt level decreases and interest payments fall, there's a decent chance of profits moving higher. Earlier this week, though, the company hit a setback as CEO Andy Ransom announced his intention to retire in 2026. With the firm still in transition, a change in leadership is a risk. Despite this, I think there's clear scope for the company to keep moving forward. Signs of operational efficiencies are starting to appear and the debt level is starting to decrease. I'm therefore optimistic that this might be a similar story to Premier Foods from five years ago. I'm not saying a 300% return is on the cards, but the two seem to have a lot in common. Rentokil's recent results have been somewhat underwhelming. The integration of its big acquisition has taken longer than a lot of shareholders were expecting. I think, however, there are clear reasons for optimism. And I'm struck by the similarities between the company right now and Premier Foods when I first saw it in 2020. I missed out on the FTSE 250 stock back then because I was concerned about its debt levels. But I'm determined not to make the same mistake again. The post This FTSE 250 stock has returned over 300% since 2020 appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Stephen Wright has positions in Rentokil Initial Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
09-05-2025
- Business
- Yahoo
Rentokil Initial plc (RTO): A Bull Case Theory
We came across a bullish thesis on Rentokil Initial plc (RTO) on Substack by Mike MaxDividends Team. In this article, we will summarize the bulls' thesis on RTO. Rentokil Initial plc (RTO)'s share was trading at $23.89 as of May 5th. RTO's trailing and forward P/E were 29.65 and 17.24 respectively according to Yahoo Finance. A pest control service technician spraying insecticide in a residential property. Rentokil's stock has fallen by 19% since March 2024, largely due to challenges in integrating Terminix, which the company acquired in late 2022. Despite these short-term setbacks, Rentokil maintains its position as the global leader in pest control, a resilient industry characterized by recurring revenues and long-term growth opportunities, especially in the context of continued industry consolidation. The company had originally targeted $200 million in synergies by 2026 through its integration plan, aimed at improving operational efficiency and expanding margins. However, these goals have been disrupted, particularly in North America, which accounts for 60% of Rentokil's revenue. Weaknesses in lead generation and sales execution led to several guidance downgrades and disappointing fiscal year 2024 results, including a modest 2.8% organic revenue growth and a decline in the adjusted operating margin to 15.4%, both falling short of initial targets. The North American business performed particularly poorly, with organic growth of just 1.5% and a drop in margin from 18.7% to 17.1%. Despite significant investments under the 'RIGHT WAY 2' plan, returns have been underwhelming, prompting management to reallocate resources to more promising initiatives for 2025. Adding to the difficulties, leadership turnover has occurred, as Brad Paulsen, the CEO of North America, will depart in April 2025 following a brief tenure, amid speculation of activist pressure from Trian Partners. He will be replaced by interim CEO Alain Moffroid. While sequential improvement was observed in Q4 2024, with growth rising to 2.3% compared to 1.4% in Q3, Rentokil still lags behind key competitor Rollins, which posted a much stronger 10.3% growth for FY24. In response to the integration difficulties, Rentokil revised its consolidation strategy. Instead of merging 600 branches into 400, the company now focuses on a hybrid model, combining larger hubs with smaller 'satellite' branches to improve local presence and operational flexibility. Early results from this new approach have been positive, and the network is expected to expand significantly beyond 500 branches. Additionally, Rentokil has decided to preserve nine well-recognized regional brands, alongside the core Rentokil and Terminix names, thus maintaining brand equity while avoiding forced unification. Although integration remains a work in progress, significant milestones have been achieved. Over 250 branches are now operating on unified IT systems, and 58 Terminix branches were migrated in the second half of 2024. A pilot initiative that covered rebranding, routing, and compensation structures showed positive early results, with 15% of Terminix branches now fully integrated. Despite the challenges faced in North America, Rentokil's strong global leadership position and resilient international operations continue to provide a solid foundation for long-term growth. While management's margin targets now appear increasingly ambitious, the company's industry-leading position and revised integration roadmap suggest that it remains a compelling investment for the future. Rentokil's stock price stood at £3.55 on March 27, 2024, reflecting an 11% decline year-to-date. With a market capitalization of £8.9 billion, the company currently trades at an EV/EBITDA multiple of 10.6x, which is below its fair value estimate of £4.50. This suggests a 26% upside from the current price, with an expected internal rate of return (IRR) of 14.6% over the projected period. Looking ahead, Rentokil's revenue growth is projected to be modest, with a compound annual growth rate (CAGR) of 3.8%, reaching £6.6 billion by FY2029. For FY2025, revenue is expected to rise by 3%, in line with analyst consensus, with growth accelerating to 4% from FY2026 onward, slightly below the company's medium-term guidance of 4.5%-6.5%. Adjusted EBITDA margins are expected to average 23.3%, rising to 24.2% by FY2029. For FY2025, Rentokil's adjusted operating margin is forecasted to remain flat at 15.5%, with no near-term margin expansion expected. By FY2029, the adjusted operating margin is anticipated to rise to 18.5%, which is more conservative than the company's target of over 20% for North America by FY2027. Free cash flow projections indicate a terminal FCF margin of 13.3%, above the company's five-year average of 10.7%. Rentokil's discounted cash flow (DCF) valuation suggests a fair price per share of £4.48, offering an IRR of 14.6%. Sensitivity analysis shows that potential changes in terminal multiples and discount rates could lead to varying upside and downside risks. Despite recent challenges, Rentokil's strong position in the pest control industry, its robust brand portfolio, and expanding international presence provide a solid foundation for future growth. However, tangible progress in North America is necessary to regain full confidence in the company's management. Given its current valuation, Rentokil presents an attractive investment opportunity relative to its long-term fundamentals, with significant upside potential if the company successfully navigates its integration challenges. Rentokil Initial plc (RTO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 24 hedge fund portfolios held RTO at the end of the fourth quarter which was 19 in the previous quarter. While we acknowledge the risk and potential of RTO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RTO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Independent
07-05-2025
- Business
- The Independent
Rentokil boss to retire after 12 years at the helm
The boss of pest control firm Rentokil Initial has revealed plans to leave after nearly 12 years in the top job. Andy Ransom will retire as chief executive by the firm's annual general meeting next year. The group said it had kicked off a search for his successor, led by chairman Richard Solomons. Mr Ransom has been chief executive of the London-listed firm since October 2013, having first joined the board in May 2008 as executive director of corporate development. He said: 'I look forward to working with my successor in due course to ensure a successful transition. 'For now, I am focused on executing our growth plans in our North America business and expanding in our target markets around the world, so as to leave the company in the best possible shape for the future.' Mr Solomons paid tribute to his 'outstanding contribution' in the role. He added: 'The company has exceptional long term growth prospects but short term our priority is on turning around the underperforming North American business. 'Andy is very focused on this task and will ensure a smooth handover when a new chief executive is appointed.' The group's latest trading update showed the troubled North American business continued to lag behind the rest of the group after a 'slow first quarter with continued subdued lead flow'. The US business has suffered a turbulent time of late, with its former boss, Brad Paulsen, leaving in January after just over a year in the role.
Yahoo
02-05-2025
- Business
- Yahoo
Rentokil Initial (LON:RTO) shareholders have endured a 33% loss from investing in the stock three years ago
For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Rentokil Initial plc (LON:RTO) shareholders have had that experience, with the share price dropping 36% in three years, versus a market return of about 17%. Furthermore, it's down 13% in about a quarter. That's not much fun for holders. Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price. During the three years that the share price fell, Rentokil Initial's earnings per share (EPS) dropped by 4.8% each year. This reduction in EPS is slower than the 14% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. You can see below how EPS has changed over time (discover the exact values by clicking on the image). We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.. As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Rentokil Initial's TSR for the last 3 years was -33%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence! Rentokil Initial shareholders are down 11% for the year (even including dividends), but the market itself is up 5.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 3 warning signs we've spotted with Rentokil Initial (including 1 which makes us a bit uncomfortable) . But note: Rentokil Initial may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast). Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Yahoo
07-03-2025
- Business
- Yahoo
Rentokil Initial Full Year 2024 Earnings: EPS Misses Expectations
Revenue: UK£5.44b (up 1.1% from FY 2023). Net income: UK£307.0m (down 19% from FY 2023). Profit margin: 5.6% (down from 7.1% in FY 2023). EPS: UK£0.12 (down from UK£0.15 in FY 2023). All figures shown in the chart above are for the trailing 12 month (TTM) period Revenue was in line with analyst estimates. Earnings per share (EPS) missed analyst estimates by 6.6%. Looking ahead, revenue is forecast to grow 5.5% p.a. on average during the next 3 years, compared to a 5.0% growth forecast for the Commercial Services industry in the United Kingdom. Performance of the British Commercial Services industry. The company's shares are down 13% from a week ago. You should learn about the 3 warning signs we've spotted with Rentokil Initial (including 1 which is a bit unpleasant). Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
