Rentokil Initial plc (RTO.L) Discounted Future Market Cap

Rentokil Initial plc

RTO.L (LSE)

Valuation
Rentokil Initial plc Discounted Future Market Cap

"""
    Model: Discounted Future Market Cap

# Render model description
model.render_description(r"""
## Discounted Future Market Cap

This model estimates the intrinsic value of a common share by projecting the Future Market Capitalization using the estimated PE Ratio and then discounting it to the Present using an Annual Required Rate of Return.
""")

# Initialize assumptions
assumptions.init({
    "data": {
        "%discount_rate": None,
        "beta": data.get("profile:beta", default=1),
        "%risk_free_rate": data.get("treasury:year10"),
        "%market_premium": data.get("risk:totalEquityRiskPremium"),
        "pe_ratio": data.get("ratio:priceEarningsRatio"),
        "%revenue_growth_rate": None,
        "%net_income_margin": None,
        "historical_years": 10,
        "projection_years": 5,
    },
    "hierarchies": [{
        "parent": "%discount_rate",
        "children": ["beta", "%risk_free_rate", "%market_premium"]
    }]
})

# Calculate cost of equity
cost_of_equity = assumptions.get("%risk_free_rate") + assumptions.get("beta") * assumptions.get("%market_premium")
assumptions.set("%discount_rate", cost_of_equity)

# Compute metrics
data.compute({
    "%grossMargin": "income:grossProfit / income:revenue",
    "%operating_margin": "income:operatingIncome / income:revenue",
    "%netMargin": "income:netIncome / income:revenue",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "%netIncomeGrowthRate": "function:growth:income:netIncome",
    "%totalStockholdersEquityGrowthRate": "function:growth:balance:totalStockholdersEquity",

# Calculating NOPAT (Net Operating Profit After Taxes)
    "%taxRate": "income:incomeTaxExpense / income:incomeBeforeTax",
    "incomeTax": "income:operatingIncome * %taxRate",
    "nopat": "income:operatingIncome - incomeTax",

# Calculating Invested Capital
    "investedCapital": [
        "balance:totalNonCurrentAssets", "-", "balance:cashAndCashEquivalents", "+",
        "balance:totalCurrentAssets", "-", "balance:totalCurrentLiabilities"
    ],
    "%roic": "nopat / investedCapital",
})

data.set_default_range(f"{-assumptions.get('historical_years')}->0")

assumptions.set("%net_income_margin", data.average(f"%netMargin"))
assumptions.set_bounds(
    "%net_income_margin", low=0, high="100%"
)

assumptions.set("%revenue_growth_rate", data.average(f"%revenueGrowthRate"))
assumptions.set_bounds(
    "%revenue_growth_rate", low=0, high="25%"
)

# Compute forecasted values and ratios
data.compute({
    "income:revenue": f"""
        income:revenue:-1 * 
        (1 + {assumptions.get('%revenue_growth_rate')})
    """,
    "%revenueGrowthRate": "function:growth:income:revenue",
    "income:netIncome": f"income:revenue * {assumptions.get('%net_income_margin')}",
}, forecast=assumptions.get("projection_years"))

projected_revenue = data.get("income:revenue")
projected_net_income = data.get(f"income:netIncome:{assumptions.get('projection_years')}")

shares_outstanding = data.get("income:weightedAverageShsOut")
future_market_cap = assumptions.get("pe_ratio") * projected_net_income
discounted_future_market_cap = future_market_cap / (
            (1 + assumptions.get("%discount_rate")) ** assumptions.get("projection_years"))

stock_value = discounted_future_market_cap / shares_outstanding

# Set the final value
model.set_final_value({
    "value": stock_value,
    "units": "$"
})

# Render results
model.render_results([
    [stock_value, "Present Value", "$"],
    [projected_net_income, "Estimated net income", "$"],
    [future_market_cap, "Estimated market capitalization", "$"],
    [discounted_future_market_cap, "Market capitalization discounted to present", "$"],
    [shares_outstanding, "Shares Outstanding", "#"],
    [data.get("income:eps"), "Earnings Per Share (EPS)", "$"],
    [data.get("profile:price"), "Market Price", "$"],
    [data.get("ratio:priceEarningsRatio"), "Price to Earnings (PE) Ratio", "#"]
])

# Render chart
model.render_chart({
    "data": {
        "income:revenue": "Revenue",
        "income:netIncome": "Net Income"
    },
    "start": -assumptions.get("historical_years"),
    "end": "*",
    "properties": {
        "title": "Historical and forecasted data",
        "set_editable": [
            "income:revenue",
            "income:netIncome"
        ]
    }
})

# Render table for estimated future values
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
    },
    "start": -1,
    "end": "*",
    "properties": {
        "title": "Estimated Future Values",
        "order": "ascending",
        "number_format": "M"
    }
})

# Render historical values table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "income:costOfRevenue": "Cost of Revenue",
        "income:grossProfit": "Gross Profit",
        "%grossMargin": "Gross Margin",
        "income:operatingIncome": "Operating Income",
        "%operating_margin": "Operating Margin",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Values",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Render historical growth rates table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
        "%netIncomeGrowthRate": "Net Income Growth Rate",
        "balance:totalStockholdersEquity": "Stockholders Equity",
        "%totalStockholdersEquityGrowthRate": "Equity Growth Rate",
        "%roic": "Return on Invested Capital (ROIC)",
        "nopat": "After-tax Operating Income",
        "%taxRate": "Income Tax Rate",
        "investedCapital": "Invested Capital",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Growth Rates",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Set description for assumptions
assumptions.set_description({
    "%discount_rate": r"""
        ## Discount Rate

`Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium`

The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.

[Read More](https://www.investopedia.com/terms/c/costofequity.asp#mntl-sc-block_1-0-20)
    """,

"beta": r"""
        ## Beta

Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.
    """,

"%risk_free_rate": r"""
        ## Risk-Free Rate

The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
        By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.
    """,

"%market_premium": r"""
        ## Market Premium

Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.
    """,

"pe_ratio": r"""
        ## Price to Earnings (PE) Ratio

Estimated Price to Earnings (PE) Ratio at the end of the projection period.

`Future Market Cap` = `PE Ratio` * `Projected Net Income`
    """,

"%revenue_growth_rate": r"""
        ## Revenue Growth Rate

The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.
    """,

"%net_income_margin": r"""
        ## Net Income Margin

Net Income expressed as a percentage of Revenue.
    """,

"historical_years": r"""
        ## Historical Years

The number of historical years used to calculate averages for historical data.
    """,

"projection_years": r"""
        ## Projection Years

The number of years for projecting the analysis into the future.
    """,
})

print("End of model.")

Estimated Value

GBp

Market Price GBp

* Values are not guaranteed, please do your own
research before making investment decisions.

Discounted Future Market Cap

Interactive Assumptions

Discount Rate Discount Rate `Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium` The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula. Read More	%
↳ Beta Beta Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.	#
↳ Risk Free Rate Risk-Free Rate The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.	%
↳ Market Premium Market Premium Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.	%
Pe Ratio Price to Earnings (PE) Ratio Estimated Price to Earnings (PE) Ratio at the end of the projection period. `Future Market Cap` = `PE Ratio` * `Projected Net Income`	#
Revenue Growth Rate Revenue Growth Rate The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.	%
Net Income Margin Net Income Margin Net Income expressed as a percentage of Revenue.	%
Historical Years Historical Years The number of historical years used to calculate averages for historical data.	#
Projection Years Projection Years The number of years for projecting the analysis into the future.	#

Results
Present Value	1.16 Thou. GBp
Estimated net income	70.53 Bil. GBp
Estimated market capitalization	4,623 Bil. GBp
Market capitalization discounted to present	3,365 Bil. GBp
Shares Outstanding	2.91 Bil.
Earnings Per Share (EPS)	7.67 GBp
Market Price	462.4 GBp
Price to Earnings (PE) Ratio	65.54

Historical and forecasted data

Monetary values in GBp

{"sectionId": "section-chart-1", "sectionType": "chart", "title": "Historical and forecasted data", "timeseries": "annual", "series": [{"label": "Revenue", "mappingKey": "income:revenue", "data": [{"l": "2015", "x": "2015-12-31", "y": 175900000000}, {"l": "2016", "x": "2016-12-31", "y": 216810000000}, {"l": "2017", "x": "2017-12-31", "y": 241230000000}, {"l": "2018", "x": "2018-12-31", "y": 245500000000}, {"l": "2019", "x": "2019-12-31", "y": 267620000000}, {"l": "2020", "x": "2020-12-31", "y": 278940000000}, {"l": "2021", "x": "2021-12-31", "y": 295390000000}, {"l": "2022", "x": "2022-12-31", "y": 371400000000}, {"l": "2023", "x": "2023-12-31", "y": 537500000000}, {"l": "2024", "x": "2024-12-31", "y": 543600000000}, {"l": "2025", "x": "2025-12-31", "y": 597579480000, "oy": 597579480000, "e": true, "d": 2025, "g": 9.93, "og": 9.93}, {"l": "2026", "x": "2026-12-31", "y": 656919122364, "oy": 656919122364, "e": true, "d": 2026, "g": 9.93, "og": 9.93}, {"l": "2027", "x": "2027-12-31", "y": 722151191214, "oy": 722151191214, "e": true, "d": 2027, "g": 9.93, "og": 9.93}, {"l": "2028", "x": "2028-12-31", "y": 793860804502, "oy": 793860804502, "e": true, "d": 2028, "g": 9.93, "og": 9.93}, {"l": "2029", "x": "2029-12-31", "y": 872691182389, "oy": 872691182389, "e": true, "d": 2029, "g": 9.93, "og": 9.93}], "dataType": ".", "displayAs": "line", "dataTimeseries": "annual", "hidden": false}, {"label": "Net Income", "mappingKey": "income:netIncome", "data": [{"l": "2015", "x": "2015-12-31", "y": 12430000000}, {"l": "2016", "x": "2016-12-31", "y": 16750000000}, {"l": "2017", "x": "2017-12-31", "y": 68280000000}, {"l": "2018", "x": "2018-12-31", "y": -9830000000}, {"l": "2019", "x": "2019-12-31", "y": 28380000000}, {"l": "2020", "x": "2020-12-31", "y": 18600000000}, {"l": "2021", "x": "2021-12-31", "y": 26300000000}, {"l": "2022", "x": "2022-12-31", "y": 23200000000}, {"l": "2023", "x": "2023-12-31", "y": 38100000000}, {"l": "2024", "x": "2024-12-31", "y": 30700000000}, {"l": "2025", "x": "2025-12-31", "y": 48296373573, "oy": 48296373573, "e": true, "d": 2025, "g": 57.32, "og": 57.32}, {"l": "2026", "x": "2026-12-31", "y": 53092203469, "oy": 53092203469, "e": true, "d": 2026, "g": 9.93, "og": 9.93}, {"l": "2027", "x": "2027-12-31", "y": 58364259273, "oy": 58364259273, "e": true, "d": 2027, "g": 9.93, "og": 9.93}, {"l": "2028", "x": "2028-12-31", "y": 64159830219, "oy": 64159830219, "e": true, "d": 2028, "g": 9.93, "og": 9.93}, {"l": "2029", "x": "2029-12-31", "y": 70530901360, "oy": 70530901360, "e": true, "d": 2029, "g": 9.93, "og": 9.93}], "dataType": ".", "displayAs": "line", "dataTimeseries": "annual", "hidden": false}], "editableDates": {"2025-12-31": 41, "2026-12-31": 42, "2027-12-31": 43, "2028-12-31": 44, "2029-12-31": 45}, "properties": {"display_table": true}, "width": "full"}

Edit Chart Values	2025-12-31	2026-12-31	2027-12-31	2028-12-31	2029-12-31

↳ Growth Rate

Estimated Future Values

Monetary values in GBp amounts except #	2024 Dec 31	LTM Feb 19	2025 Dec 31	2026 Dec 31	2027 Dec 31	2028 Dec 31	2029 Dec 31
Revenue	543,600	441,200	597,579	656,919	722,151	793,861	872,691
Revenue Growth Rate	1.14%	-18.84%	9.93%	9.93%	9.93%	9.93%	9.93%
Net Income	30,700	20,500	48,296	53,092	58,364	64,160	70,531

Monetary values in GBp

amounts except #

2024
Dec 31

LTM
Feb 19

2025
Dec 31

2026
Dec 31

2027
Dec 31

2028
Dec 31

2029
Dec 31

Revenue

543,600

441,200

597,579

656,919

722,151

793,861

872,691

Revenue Growth Rate

1.14%

-18.84%

9.93%

Net Income

30,700

20,500

48,296

53,092

58,364

64,160

70,531

Historical Values

Monetary values in GBp amounts except #	Average	LTM Feb 19	2024 Dec 31	2023 Dec 31	2022 Dec 31	2021 Dec 31	2020 Dec 31	2019 Dec 31	2018 Dec 31	2017 Dec 31	2016 Dec 31	2015 Dec 31
Revenue	328,645	441,200	543,600	537,500	371,400	295,390	278,940	267,620	245,500	241,230	216,810	175,900
Cost of Revenue	223,656	387,650	87,700	387,800	273,700	223,910	213,640	209,900	191,140	183,830	167,400	133,550
Gross Profit	104,988	53,550	455,900	149,700	97,700	71,480	65,300	57,720	54,360	57,400	49,410	42,350
Gross Margin	28.38%	12.14%	83.87%	27.85%	26.31%	24.2%	23.41%	21.57%	22.14%	23.79%	22.79%	24.08%
Operating Income	35,964	46,000	54,900	76,600	31,700	34,650	29,380	26,560	24,550	29,240	23,240	18,780
Operating Margin	10.82%	10.43%	10.1%	14.25%	8.54%	11.73%	10.53%	9.93%	10%	12.12%	10.72%	10.68%
Net Income	24,855	20,500	30,700	38,100	23,200	26,300	18,600	28,380	-9,830	68,280	16,750	12,430
Net Margin	8.08%	4.65%	5.65%	7.09%	6.25%	8.9%	6.67%	10.6%	-4%	28.3%	7.73%	7.07%

Historical Growth Rates

Monetary values in GBp amounts except #	Average	LTM Feb 19	2024 Dec 31	2023 Dec 31	2022 Dec 31	2021 Dec 31	2020 Dec 31	2019 Dec 31	2018 Dec 31	2017 Dec 31	2016 Dec 31	2015 Dec 31
Revenue	328,645	441,200	543,600	537,500	371,400	295,390	278,940	267,620	245,500	241,230	216,810	175,900
Revenue Growth Rate	9.93%	-18.84%	1.14%	44.72%	25.73%	5.9%	4.23%	9.01%	1.77%	11.26%	23.26%	1.04%
Net Income	24,855	20,500	30,700	38,100	23,200	26,300	18,600	28,380	-9,830	68,280	16,750	12,430
Net Margin	8.08%	4.65%	5.65%	7.09%	6.25%	8.9%	6.67%	10.6%	-4%	28.3%	7.73%	7.07%
Net Income Growth Rate	-18.78%	-33.22%	-19.42%	64.22%	-11.79%	41.4%	-34.46%	-388.7%	-114.4%	307.6%	34.75%	-52.52%
Stockholders Equity	212,915	526,900	422,900	408,900	409,900	126,440	112,970	100,170	83,220	93,370	36,060	21,230
Equity Growth Rate	56.98%	24.59%	3.42%	-0.244%	224.2%	11.92%	12.78%	20.37%	-10.87%	158.9%	69.85%	111.9%
Return on Invested Capital (ROIC)	11.26%	3.7%	5.89%	8.47%	3.55%	12%	33.43%	10.27%	9.99%	13.43%	10.98%	12.18%
After-tax Operating Income	28,786	34,326	41,616	59,198	24,846	28,053	23,819	22,268	21,150	27,986	18,703	14,681
Income Tax Rate	18.87%	25.38%	24.2%	22.72%	21.62%	19.04%	18.93%	16.16%	13.85%	4.29%	19.52%	21.82%
Invested Capital	387,728	927,700	707,000	698,600	698,900	233,720	71,240	216,900	211,710	208,380	170,300	120,560