As the market continues to evolve, investors are always on the lookout for the next big opportunity. With the easy money already made, it's time to focus on smart growth stocks that can deliver long-term returns. One such stock that stands out is Rentokil Initial (RTO), a global leader in pest control and hygiene services.



Rentokil Initial is a prime example of a growth stock with a wide economic moat, predictable cash flows, and smart capital allocation. The company's strategy is focused on maintaining market share leadership in its highly localized markets, with a particular emphasis on the pest-control and hygiene-service sectors. This focus has allowed Rentokil Initial to build a durable cost advantage for its pest-control business, as evidenced by its successful mergers-and-acquisitions strategy.

One of the key growth drivers for Rentokil Initial is its acquisitions and mergers. The company has completed over 200 acquisitions since 2015, focusing on targets that build geographic density and reinforce its market share leadership. The late-2022 acquisition of Terminix Global Holdings was a transformative deal that created a new US market share leader, further solidifying Rentokil Initial's position in the market.



Rentokil Initial's market share leadership and diversification across multiple service lines provide a stable foundation for growth. The company's ability to leverage its scale and resources to maintain its competitive advantage, coupled with its strategic focus on acquisitions and mergers, makes it a sustainable growth story.

In addition to its strong fundamentals, Rentokil Initial is also reasonably priced. As of Nov. 5, 2024, the stock is trading at a 34% discount to Morningstar's fair value estimate of $39.50 per share. This indicates that the stock is undervalued compared to Morningstar's assessment of its intrinsic value. Furthermore, Rentokil Initial's Price/Fair Value ratio of 0.66 is lower than the average Price/Fair Value ratio of the companies on Morningstar's Best Companies to Own list, which is 0.84. This suggests that Rentokil Initial is relatively undervalued compared to its peers on the list.



In conclusion, Rentokil Initial is the smartest growth stock to buy with $1,000 right now. Its wide economic moat, predictable cash flows, smart capital allocation, and reasonable valuation make it an attractive long-term investment. With its strong growth drivers and sustainable business model, Rentokil Initial is well-positioned to deliver significant returns for investors over the long run.