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Shares in Rentokil Initial (LSE:RTO) have fallen to £3.77 – the level I’ve previously identified as where I think they’re a bargain. But the latest drop is due to some disappointing news.
In its preliminary results for 2024, the company reported weak sales growth and a decline in operating profits. So should I buy the stock, or revise my estimate of what it’s worth?
Results
Rentokil’s sales grew 1.1% in 2024. That’s not particularly impressive and with inflation above these levels, it amounts to a decline in revenues in real terms. Worse yet, operating income fell by 12% (or 7% adjusting for amortisation, one-off costs, and changes in interest). And given this, investors might wonder why the stock didn’t fall further.
I think there are two main reasons. One is that most of this isn’t fresh news – Rentokil has been reporting weak earnings throughout the year,…
