Is Now the Right Time to Buy Rentokil Initial (RTO) Ahead of 2026?

Investors eyeing the industrial services sector have a compelling case to consider Rentokil Initial (RTO) as a potential growth catalyst in 2026. With a mix of valuation divergence, operational leverage, and long-term margin expansion on the horizon, RTO appears poised to deliver outsized returns for those willing to act now. Let's break it down.

Valuation Divergence: A Bargain in Disguise

Rentokil Initial's current valuation metrics tell a story of undervaluation relative to both historical trends and industry peers. , which is according to data. This suggests the market is discounting near-term earnings despite the company's robust fundamentals.

according to analysis is another standout. according to data, RTO is trading at a steep discount to its peers. Historically, according to data, meaning today's valuation is not just cheap-it's historically cheap. Meanwhile, according to data, indicating no overvaluation in this metric.

These numbers suggest RTO is a value play with upside potential as the market re-rates its earnings and cash flow toward historical norms.

Operational Leverage: Fueling Margin Expansion

Operational leverage is where RTO shines brightest. , the company reported a , driven by a in North America according to earnings call data. This segment, which accounts for a significant portion of RTO's business, according to macro trends.

The magic lies in RTO's cost structure. A according to earnings call data highlights its ability to convert revenue into profit efficiently. Strategic cost-cutting initiatives, according to company update, are amplifying this leverage. For every incremental dollar of revenue, RTO is retaining a growing portion as profit-a hallmark of a business with strong operational leverage.

Moreover, RTO's disciplined M&A strategy-21 deals in 2025 alone, according to company update-is compounding growth without sacrificing margins. The recent divestiture of its France Workwear business according to company update further underscores a focus on de-leveraging and capital allocation discipline.

Long-Term Margin Expansion: A Roadmap to 2026

Looking ahead, RTO's long-term margin expansion hinges on three pillars: innovation, pricing power, and strategic reinvestment. The company is rolling out satellite branches and enhancing digital marketing in North America according to financial data, which is boosting customer retention and lead generation. These initiatives are not just incremental-they're structural, positioning RTO to capture market share in a sector with recurring revenue dynamics.

Management's guidance is equally compelling. With a clear path to a according to macro trends, investors can expect a step-up in profitability that should translate to higher earnings and cash flow. The combination of organic growth according to earnings call data (3.4% in Q3 2025) and disciplined M&A creates a flywheel effect: more revenue, better margins, and reinvestment in high-return opportunities.

The Bottom Line: A Buy Ahead of 2026

For investors with a 12- to 18-month horizon, RTO checks all the boxes. Its valuation is attractively divergent from both historical and industry benchmarks, its operational leverage is driving near-term margin gains, and its long-term strategy is engineered for compounding returns.

The key question is whether the market will catch up to RTO's fundamentals before 2026. Given the company's track record of executing on cost efficiency and growth, the answer leans heavily in favor of a re-rating. For those willing to buy the dip in a stock that's trading at a discount to its intrinsic value, RTO could be a standout addition to a growth-oriented portfolio.