Up 10% yesterday: what on earth’s going on with the Rentokil Initial share price?

At Rentokil Initial The change in RTO (LSE) stock price for today is 10%. And about the same number was higher last year.

It’s quite a stunt for the big one FTSE 100 Stock up on the best time. But it’s even more surprising given the dire market sentiment we’ve had this week.

So commercial pest control companies must have said something positive to impress the market. And yes.

The good news came with the report of full year results for 2022. The company published a set of solid figures and a positive outlook.

Chief executive Andy Ransom showed organic revenue growth of almost 7% year-on-year.

But a big part of the stock’s move yesterday came from assurances that its big acquisition of Terminix is ​​going well.

Big up in America

Rentokil Initial announced the acquisition of the American company in December 2021. And at that time, Ransom said that the combination of the two businesses will create a global leader in commercial, residential and termite pest control.

And larger companies will have a large presence in North America – the world’s largest pest control market.

In yesterday’s report, Ransom said initial progress on the integration of the acquisition had been excellent. And the company has now increased its expectations for total cost savings synergies, from around $150m to at least $200m by the end of 2025.

This situation reinforces the directors’ strong belief in the company’s greater financial and strategic opportunities in the coming years.

And the outlook for 2023 is bullish. Businesses have managed cost inflation well by raising selling prices. And expect profit margins to increase slightly. But on top of that, earnings look set to rise by a mid-teens percentage through 2023.

Looking further ahead, the directors increased their guidance for organic revenue growth in 2025. They now expect to achieve at least 5% instead of the previously estimated 4% to 5%.

Growth in cash-generating acquisitions

But organic growth is not the only game in town for Rentokil Initial. In addition, the company is making another 52 acquisitions as well as Terminix during 2022. And there is a good pipeline of high-quality acquisition opportunities in 2023.

Meanwhile, corporate debt seems to be under control. And it has an impressive multi-year track record of steady earnings, operating cash flow and shareholder dividends.

But all these good things come at a price for investors, as shown in their prices. The expected earnings multiple is close to 24 for 2023. And the anticipated dividend yield is about 1.4%.

Those who share shares may have an event. And high prices can bring risks for investors. For example, if the business becomes ex-growth in the future, any price derating can be brutal for the stock price.

However, this company shows many signs of a growth story in good health. And it may be time for investors to dig in with more in-depth research now.