Yahoo Finance The Rentokil Initial (LON:RTO) Share Price Has Gained 180%, So Why Not Pay It Some Attention?
Rentokil Initial plc (LON:RTO) shareholders might be concerned after seeing the share price drop 21% in the last month. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 180% return, over that period. We think it's more important to dwell on the long term returns than the short term returns. Ultimately business performance will determine whether the stock price continues the positive long term trend.
See our latest analysis for Rentokil Initial
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, Rentokil Initial moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Rentokil Initial has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Rentokil Initial, it has a TSR of 202% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Rentokil Initial shareholders have received a total shareholder return of 9.0% over the last year. That's including the dividend. Having said that, the five-year TSR of 25% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Rentokil Initial better, we need to consider many other factors. Take risks, for example - Rentokil Initial has 4 warning signs (and 1 which is a bit concerning) we think you should know about.
Of course Rentokil Initial may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
