Overview
Deutsche Bank updated its recommendation on Rentokil Initial Plc. (NYSE:RTO), moving the stock from Buy to Hold and trimming the firm�s price target to GBP4.65 from GBP5.05. The broker characterized Rentokil as a global market leader operating in an attractive, defensive sector, but expressed concern that the company�s Pest Control division is not generating margins on par with leading international peers.
Profitability and valuation metrics
Deutsche Bank noted that, while Rentokil has maintained a strong gross profit profile, some operating segments are under-earning. InvestingPro data cited by analysts shows the company posted a gross profit margin of 83% over the last twelve months. At the same time, the shares trade at a high price-to-earnings multiple of 59.3. InvestingPro�s Fair Value analysis, however, still suggests the stock is slightly undervalued at current levels.
Margin shortfall in Pest Control
The broker�s work points specifically to the Pest Control category as the area falling short relative to comparable international operators. Deutsche Bank said it is awaiting more detail from Rentokil�s incoming chief executive on the pathway to close the growth and margin gaps to peers over time. The bank highlighted that management decisions, including potential increases in investment to stimulate organic revenue growth, could exert pressure on near-term forecasts. It also acknowledged that such investment might be appropriate to drive longer-term improvement.
Market listings
In addition to its NYSE listing under RTO, Rentokil Initial also trades on the London Stock Exchange under the ticker RTO:LN.
Contrasting view from BofA
In separate analyst activity, BofA Securities upgraded Rentokil from Neutral to Buy and lifted its price target to GBP5.10 from GBP4.25. BofA attributes its more positive stance to progress in integrating Terminix, which the firm sees as a material factor that could contribute to a potential rerating by 2026. The bank added Rentokil to its "25 stocks for 2026" list as well as its Europe 1 list of top ideas, signaling increased optimism about the company�s strategic moves.
Investor resources and monitoring
InvestingPro is noted as offering five additional tips for RTO investors and provides financial health metrics to help track the company�s turnaround progress. These resources are intended to assist investors monitoring whether planned investments and integration milestones translate into improved growth and margin outcomes.
Conclusion
Analyst opinions on Rentokil diverge: Deutsche Bank has moved to a more cautious stance focused on closing a margin gap in Pest Control and the potential short-term impact of investment, while BofA points to operational progress from the Terminix integration and anticipates upside over a multi-year horizon. Market participants looking at Rentokil will likely weigh near-term investment-driven pressure against longer-term structural benefits from integration and recovery in under-earning segments.