As of June 10, 2025, Rentokil Initial PLC's estimated intrinsic value ranges from $153.22 to $601.52 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $261.27 | -25.5% |
| Discounted Cash Flow (5Y) | $205.29 | -41.4% |
| Dividend Discount Model (Multi-Stage) | $191.18 | -45.5% |
| Dividend Discount Model (Stable) | $153.22 | -56.3% |
| Earnings Power Value | $601.52 | +71.6% |
Is Rentokil Initial PLC (RTO.L) undervalued or overvalued?
With the current market price at $350.60, the stock appears to be significantly overvalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Rentokil Initial PLC's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.84 | 0.96 |
| Cost of equity | 9.0% | 11.7% |
| Cost of debt | 4.0% | 5.7% |
| Tax rate | 20.6% | 22.1% |
| Debt/Equity ratio | 0.46 | 0.46 |
| After-tax WACC | 7.2% | 9.4% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $205 | $8,337M | 78.1% |
| 10-Year Growth | $261 | $9,742M | 62.8% |
| 5-Year EBITDA | $99 | $5,675M | 67.9% |
| 10-Year EBITDA | $155 | $7,084M | 48.9% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $1,490M |
| Discount Rate (WACC) | 9.4% - 7.2% |
| Enterprise Value | $15,835M - $20,730M |
| Net Debt | $3,184M |
| Equity Value | $12,651M - $17,546M |
| Outstanding Shares | 25M |
| Fair Value | $504 - $699 |
| Selected Fair Value | $601.52 |
| Metric | Value |
|---|---|
| Market Capitalization | $8800M |
| Enterprise Value | $11984M |
| Trailing P/E | 28.67 |
| Forward P/E | 25.20 |
| Trailing EV/EBITDA | 5.75 |
| Current Dividend Yield | 260.22% |
| Dividend Growth Rate (5Y) | 14.30% |
| Debt-to-Equity Ratio | 0.46 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $78.38 |
| Discounted Cash Flow (5Y) | 25% | $51.32 |
| Dividend Discount Model (Multi-Stage) | 20% | $38.24 |
| Dividend Discount Model (Stable) | 15% | $22.98 |
| Earnings Power Value | 10% | $60.15 |
| Weighted Average | 100% | $251.07 |
Based on our comprehensive valuation analysis, Rentokil Initial PLC's weighted average intrinsic value is $251.07, which is approximately 28.4% below the current market price of $350.60.
Key investment considerations:
Given these factors, we believe Rentokil Initial PLC is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.