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Rentokil Initial (RTO)
NYSE:RTO
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Rentokil Initial
(NYSE:RTO)
Rating:75Outperform
Price Target:
$26.00
▲( 11.83% Upside)
Rentokil Initial (RTO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$11.88B
Dividend Yield2.21%
Average Volume (3M)874.91K
Price to Earnings (P/E)30.4
Beta (1Y)0.98
Revenue Growth3.96%
EPS Growth-17.48%
CountryUS
Employees68,485
SectorIndustrials
Sector Strength90
IndustrySpecialty Business Services
Share Statistics
EPS (TTM)0.62
Shares Outstanding504,908,000
10 Day Avg. Volume533,054
30 Day Avg. Volume874,915
Financial Highlights & Ratios
PEG Ratio-1.17
Price to Book (P/B)2.12
Price to Sales (P/S)0.00
P/FCF Ratio17.53
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
Rentokil Initial Business Overview & Revenue Model
Company DescriptionRentokil Initial (RTO) is a global leader in the provision of pest control and hygiene services. Operating across multiple sectors, the company offers comprehensive solutions to manage pest-related issues and ensure cleanliness and safety in various environments. Rentokil Initial serves a diverse range of clients, including residential, commercial, and industrial sectors, with core services that include pest control, hygiene services, and property care solutions.
How the Company Makes MoneyRentokil Initial generates revenue primarily through its pest control and hygiene service offerings. The company's pest control services include the identification, prevention, and eradication of pests across residential, commercial, and industrial properties. These services are provided through one-time treatments or ongoing service agreements, which create a recurring revenue stream. The hygiene services division offers products and services such as hand hygiene, air care, and washroom solutions, which are typically contracted on a subscription basis. Rentokil Initial also benefits from strategic partnerships and acquisitions that expand its market reach and service capabilities. The company's earnings are further supported by its extensive global network, allowing it to leverage economies of scale and maintain a competitive edge in the industry.
Rentokil Initial Financial Statement Overview
Summary
Rentokil Initial demonstrates strong financial performance with steady revenue growth and healthy profitability. The company maintains a healthy balance sheet, though rising debt levels require attention. Effective cash flow management supports strategic investments.Income Statement
Rentokil Initial has demonstrated steady revenue growth, with a significant increase from 2020 to 2024. The gross profit margin and net profit margin indicate healthy profitability, although there was a slight decline in EBIT and EBITDA margins between 2023 and 2024. The company's ability to maintain a high revenue growth rate and strong margins highlights its competitive positioning in the corporate services industry.85
Very Positive
Balance Sheet
The balance sheet reflects a strong equity base with a moderate debt-to-equity ratio, indicating prudent financial leverage. The equity ratio is stable, but there is a noticeable increase in total debt over the years. Return on equity is healthy, driven by consistent net income growth, though the rising debt level poses a potential risk if not managed carefully.78
Positive
Cash Flow
Operating cash flow remains robust, supporting the company's free cash flow generation. The free cash flow to net income and operating cash flow to net income ratios are favorable, showcasing effective cash conversion. However, the free cash flow growth rate has been inconsistent, suggesting fluctuations in capital expenditures and cash management strategies.82
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 5.44B | 5.38B | 3.71B | 2.95B | 2.79B | Gross Profit |
| 726.00M | 4.45B | 977.00M | 714.80M | 653.00M | EBIT |
| 549.00M | 625.00M | 498.00M | 366.20M | 301.00M | EBITDA |
| 990.00M | 1.16B | 767.00M | 656.00M | 581.00M | Net Income Common Stockholders |
| 307.00M | 381.00M | 232.00M | 263.00M | 186.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 927.00M | 1.55B | 2.17B | 670.00M | 2.12B | Total Assets |
| 10.55B | 11.13B | 11.92B | 4.32B | 5.58B | Total Debt |
| 4.14B | 4.73B | 5.40B | 1.93B | 3.14B | Net Debt |
| 3.22B | 3.19B | 3.23B | 1.26B | 1.19B | Total Liabilities |
| 6.33B | 7.04B | 7.82B | 3.06B | 4.45B | Stockholders Equity |
| 4.23B | 4.09B | 4.10B | 1.26B | 1.13B |
| Cash Flow | Free Cash Flow | |||
| 507.00M | 526.00M | 414.00M | 407.20M | 382.60M | Operating Cash Flow |
| 678.00M | 737.00M | 604.00M | 567.10M | 535.10M | Investing Cash Flow |
| -373.00M | -416.00M | -1.20B | -445.00M | -509.20M | Financing Cash Flow |
| -752.00M | -361.00M | 1.32B | -417.10M | 253.50M |
Rentokil Initial Technical Analysis
Neutral
23.25
Price Trends
22.59
Positive
23.43
Negative
24.92
Negative
Market Momentum
0.19
Positive
52.91
Neutral
59.16
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RTO, the sentiment is Neutral. The current price of 23.25 is below the 20-day moving average (MA) of 23.33, above the 50-day MA of 22.59, and below the 200-day MA of 24.92, indicating a neutral trend. The MACD of 0.19 indicates Positive momentum. The RSI at 52.91 is Neutral, neither overbought nor oversold. The STOCH value of 59.16 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for RTO.
Rentokil Initial Risk Analysis
Rentokil Initial disclosed 27 risk factors in its most recent earnings report. Rentokil Initial reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Rentokil Initial Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
84 Outperform | $3.35B | 23.35 | 7.17% | 0.72% | 5.04% | 31.69% | |
77 Outperform | $14.39B | 42.72 | 41.07% | 0.70% | 6.84% | 29.09% | |
75 Outperform | $11.88B | 30.42 | 7.44% | 2.21% | 3.96% | -17.48% | |
74 Outperform | $4.00B | 48.79 | 6.25% | ― | 32.27% | -40.50% | |
74 Outperform | $3.27B | 41.38 | 4.46% | 1.91% | 2.81% | -67.57% | |
71 Outperform | $10.43B | 30.61 | 11.77% | 1.03% | -3.47% | -45.03% | |
64 Neutral | $4.39B | 11.81 | 5.17% | 249.38% | 3.98% | -12.17% |
* Industrials Sector Average
Performance Comparison
RTO
Rentokil Initial
23.34
-2.12
-8.33%
ABM
ABM Industries
51.35
5.04
10.88%
CBZ
CBIZ
72.25
-6.20
-7.90%
UNF
UniFirst
184.66
22.84
14.11%
ARMK
ARAMARK Holdings
38.88
7.61
24.34%
ULS
UL Solutions Inc. Class A
71.00
29.37
70.55%
Rentokil Initial Earnings Call Summary
Earnings Call Date:Mar 06, 2025
(Q4-2024)
| % Change Since: -6.17%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong international growth and improvements in customer and colleague retention. However, it was overshadowed by challenges in North America, including lower-than-expected revenue growth, profit declines, and integration complexities. The company is implementing strategic changes to address these issues, but the overall sentiment reflects the significant challenges that remain.Q4-2024 Updates
Positive Updates
International Revenue Growth
International businesses outside of North America delivered strong revenue growth of 8.2%, with organic revenue contributing 4.7%. Pest Control organic growth was particularly strong at 5.3%.
Customer and Colleague Retention
Colleague retention increased by 2.4%, reducing recruitment needs by around 1,000 people. Customer satisfaction improved with a one-point increase in Net Promoter Score and customer retention rose by 50 basis points.
Satellite Branch Expansion
Opened 10 satellite branches in Q4, with a plan to exceed 500 locations including satellites. The satellite branches are part of a strategy to enhance local presence and operational efficiency.
Workwear Business Performance
French Workwear business delivered revenue growth of 7.1%, all organic, with adjusted operating profit growing by 8.6% and margins at 17.7%.
International Business Growth
International revenue grew by 8.2% to GBP 2.2 billion, with 4.7% organic growth led by Pest Control and Workwear. The Europe and LatAm region saw a 5% increase, with adjusted operating profit also up by 5.7%.
Negative Updates
North America Underperformance
North American revenue grew by only 1.3%, with organic growth at 1.5%. Adjusted operating profit declined by 7% due to below-plan revenue growth and higher in-year investments.
Profit Decline and Margin Reduction
Adjusted operating profit was down 7.1% to GBP 860 million, with a corresponding margin reduction of 130 basis points.
Cost and Investment Inefficiencies
A portion of investments in 2024 did not drive optimal effectiveness, leading to suboptimal sales and marketing returns. These will be redirected in 2025.
Integration Challenges
The integration of Terminix is complex and has led to periods of disruption. The program is expected to be complete by the end of 2026, with significant cost savings anticipated post-integration.
Weak Q1 Start and Lead Generation Issues
Q1 2025 is off to a slow start due to weak lead flow, adverse weather, and the leap year effect. Lead generation and sales conversion are areas needing significant improvement.
Company Guidance
During the call, Rentokil Initial provided guidance on its performance and strategy for 2025. The company reported a revenue of GBP 5.6 billion in 2024, marking a 3.9% increase, with organic growth at 2.8%. The North American business underperformed with only 1.3% growth, while International saw an 8.2% increase. Customer retention improved by 60 basis points to 80.1%, and colleague retention increased by 4.2%. The company plans to continue its integration of Terminix, aiming to achieve operating profit margins above 20% by 2027. For 2025, Rentokil aims to enhance lead generation, improve sales conversion, and expand its branch network to over 500 locations, including new satellite branches. The company's capital allocation strategy prioritizes organic investment, bolt-on acquisitions, and a progressive dividend policy, with a target net debt-to-EBITDA ratio of 2 to 2.5x. Rentokil expects to meet market expectations for 2025 despite a slow start in Q1.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.