We find Rentokil to be an attractive investment opportunity, as it is currently trading at approximately a 30% discount to our fair value estimate of GBX 490. Our narrow moat rating reflects the company's cost advantage, stemming from its superior operational scale and route density, which enable it to distribute fixed costs over a larger revenue base. The stock has faced challenges due to inadequate integration following the 2022 acquisition of Terminix, which positioned Rentokil as the largest pest control firm in the United States. This poor execution, along with issues in employee and customer retention, has adversely impacted lead generation and organic sales growth. Nevertheless, margins have improved due to increased route density. Furthermore, retention metrics showed improvement in 2024, bolstering our confidence that Rentokil can revitalize its organic growth and leverage its regional scale in the US over the next five years.
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