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Rentokil Initial (LON:RTO) Has Gifted Shareholders With A Fantastic 300% Total Return On Their Investment

Simply Wall St

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. One great example is Rentokil Initial plc (LON:RTO) which saw its share price drive 278% higher over five years.

Check out our latest analysis for Rentokil Initial

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

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 image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
earnings-per-share-growth

We know that Rentokil Initial has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Rentokil Initial will grow revenue in the future.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Rentokil Initial's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Rentokil Initial shareholders, and that cash payout contributed to why its TSR of 300%, over the last 5 years, is better than the share price return.

A Different Perspective

It's good to see that Rentokil Initial has rewarded shareholders with a total shareholder return of 22% in the last twelve months. However, that falls short of the 32% TSR per annum it has made for shareholders, each year, over five years. 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. To that end, you should be aware of the 2 warning signs we've spotted with Rentokil Initial .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.