Image source: Getty Images
At the end of each month, I start reviewing my holdings and looking for potential future opportunities. one FTSE 100 What caught my eye was the stock. Rentokil (LSE:RTO) Let’s take a closer look at whether I should buy or avoid shares.
Business services
As an introduction, Rentokil is an international business services company. Still part of the service is known as the pest control business. Additionally, it offers janitorial services, facility management and more. With more than 40,000 employees, it is present in more than 70 countries.
So what’s going on with Rentokil shares right now? Well, as I write, they are burning at 485p. This time last year, the stock was trading for 564p. This equates to a 14 percent discount over a 12-month period.
FTSE 100 stocks with risks
Due to the current economic uncertainty caused by rising inflation, Rentokil may see its performance and rate of return suffer. First, rising costs can put pressure on profit margins. Subsequently, supply chain disruptions can negatively impact the ability to perform day-to-day operations.
One thing I love about Rentokil and its growth journey is its buying interest. The risk associated with regular purchases is that businesses can often overpay. Likewise, there is always the possibility that the new business will not integrate with the existing one or will not work well. Taking it down would be costly and could hurt balance sheets as well as investor sentiment and reactions.
Investment matter and my decision
So let’s take a look at some of the positives of Rentokil shares. First, I was impressed by Rentokil’s prime position in a thriving growth market. Services are essential, and will only increase with demand. I will specifically mention the pest control and sanitation units here. The pandemic has shed new light on the requirements for such services. Based on its brand strength and presence, I think it should be able to continue to grow to increase its performance and returns.
Next, Rentokil has a good performance history. I know that past performance is no guarantee of the future. However, in retrospect, one realizes that revenue and profit have grown consistently over the past four years.
A final positive income stream for Rentokil is growing dividends. The current dividend yield is 1.5%. This is lower than the FTSE 100 average of 3%-4%, but I expect this to grow over time depending on the business. But I know dividends are not guaranteed.
In conclusion, I like Rentokil as a business, and as a stock to grow my holdings. It’s impossible for me to buy every stock I want, but I’d be willing to add Rentokil shares to my growth and return holdings.