Numbers

Figures converted from GBP at historical FX rates — see data/company.json.fx_rates. Ratios, margins, and multiples are unitless and unchanged.

The Numbers

Reckitt is a $19bn-revenue household & health-brands compounder trading on a low-teens trailing P/E because the headline FY2025 numbers (29.7% operating margin, 130%+ EPS growth) are flattered by a $1,677m gain on the December 2025 Essential Home disposal. Strip that out and the picture is a still-strong but no-longer-growing business — adjusted operating margin around 21%, FY2024 free cash flow of $2.8bn, and dividend payout above 100% of clean earnings two years running. The stock will rerate when investors believe the post-disposal "Core Reckitt" can compound LFL revenue mid-single-digits and convert that to cash; Q1 2026 (group LFL +0.6%, shares −5.6% on the print) is the single data point most likely to move the multiple in either direction over the next two quarters.

Snapshot

Price is the LSE close on 24 Apr 2026 ($64.27 ADR-equivalent on £47.73). Market cap reflects ~685m diluted shares; net debt of $8.7B brings EV to ~$52.8B. Adjusted operating margin removes the $1,677m gain on disposal of Essential Home that the FY2025 P&L runs through operating profit — the reported margin of 29.7% is not a comparable run-rate.

Is this a well-run business that will still be around in 10 years?

The brand portfolio throws off premium gross margins and double-digit operating margins through the cycle, but the equity stack is mostly goodwill from Mead Johnson (acquired 2017 for $17B), and the company has impaired that asset twice — $6.7bn in 2019 and again in 2021. Cash quality is the saving grace: clean operating cash flow consistently exceeds reported net income, but the dividend has run above earnings for two consecutive years, so the cushion is thinner than the headline yield suggests.

Revenue & earnings power — 11-year view

Two messages on one canvas. Revenue has flat-lined since 2017 — the $19.1bn FY2025 print is barely above the $17.4bn FY2022 figure (the year-on-year shape is mostly GBP/USD FX) and includes acquired hygiene-mix and price/inflation pass-through. Margins have collapsed from a 24%+ Lysol-era plateau to mid-teens, with two outright operating-loss years (2019, 2021) driven by Mead Johnson goodwill impairments. The FY2025 spike is the disposal gain — adjust it out and underlying margin is ~21%, recovering but well below the pre-Mead-Johnson 24%.

EPS & dividend per share — what the shareholder actually receives

The dividend rose every year for nine years through FY2024 ($2.31 → $2.60 per share) while EPS swung wildly. Payout ratio breached 100% in FY2024 and FY2020 — a dividend that is structurally bigger than reported earnings is funded from the cash flow gap, the 2017 RB Foods proceeds, the 2025 Essential Home proceeds, or simply by levering up. None of those are a recurring source of yield.

Cash generation — are the earnings real?

FY2024 is the cleaner reference year — CFO of $3.4bn dwarfed reported net income of $1.8bn (FCF/NI = 155%), driven by D&A and working-capital release. FY2025 reverses optically: net income includes the $1,677m disposal gain, while CFO falls to $3.1bn and FCF drops to $2.3bn on higher tax ($1,208m vs $877m), higher capex ($828m vs $583m), and lower working-capital benefit. The headline EPS doubled while the underlying cash engine ran slower. This is the gap to watch.

Capital allocation — where $5.4bn of cash went the last two years

FY2024 returned $3.4bn to holders against $2.8bn FCF — funded by debt. FY2025 cut the buyback nearly in half ($1.18bn vs $1.66bn) but received $2.4bn from Essential Home, leaving roughly $0.7bn for net debt reduction. The signal: management is pivoting from "fund the dividend with leverage" to "use disposal proceeds to derisk the balance sheet and continue measured buybacks." The next test is whether the smaller, focused Core Reckitt portfolio can self-fund both the dividend and a buyback without selling more pieces.

Balance sheet — leverage, goodwill, and what's underneath

Net debt fell ~$1.0bn in 2025 thanks to the disposal — leverage at ~1.7x EBITDA is comfortable, and the credit story is solid investment-grade. The structural weakness is on the asset side: $21.3bn of goodwill and intangibles vs $10.5bn of equity — a write-down of a third of that goodwill would wipe out book equity. Two prior IFCN impairments (2019, 2021) say the asset is reactive to nutrition-segment performance. Watch the IFCN/Mead Johnson revenue trajectory each half — that is what gates the next impairment cycle.

Valuation — current vs its own decade

The valuation chart is the heart of the page. Strip out the disposal-flattered FY2025 P/E (10.2x looks cheap, but the denominator includes a $1,677m one-off gain) and the right reference is the FY2024 clean P/E of 23.5x — which is roughly in line with the 10-year median around 22x. So the stock is not screamingly cheap on clean earnings; the cheapness story rests on (a) EV/EBITDA of ~10.5x being a meaningful discount to HPC peers around 13–14x, and (b) sell-side targets averaging $79.24 versus the $64.27 print, implying ~23% upside.

Peer comparison — Reckitt vs the global HPC + consumer-health bench

Reckitt's clean P/E of 23.5x is not a discount to global peers — it's a typical price for a stalled-growth consumer-defensive name (HLN 19x, UL 19x, KMB 20x, KVUE 23x). The honest discount is on EV/EBITDA — Reckitt at ~10.5x adjusted versus a peer median of 13.6x. Operating margin (21% adj.) is better than UL, CL, KMB, KVUE and roughly in line with PG. The market is paying for organic growth, and Reckitt's revenue has been flat for three years.

Fair value & scenario

Anchoring on the $52.8bn EV / $4.9bn adjusted EBITDA today: the bear case assumes Core Reckitt growth never recovers and the multiple drifts toward Kimberly-Clark/Unilever (12x) — fair value around $54. The base case is the analyst consensus $79.24, which assumes LFL recovers to 2–3% and the discount narrows by half. The bull case requires Core Reckitt to deliver the 4%+ LFL it now guides to and a peer-median EV/EBITDA — that puts the stock at $96.96. The bear-bull range is wide ($54 to $97) because the answer turns on a single variable: is the underlying portfolio still growing.

Closing read

The numbers confirm that this is a defensive cash machine: 21% adjusted operating margin, 1.7x leverage, $2.8bn of clean FCF, brands that survived two cycles. They contradict the "expensive defensive" caricature — on EV/EBITDA, Reckitt is the cheapest large-cap HPC name in the bench, ~25% below peer median. They also contradict the "10x P/E bargain" caricature — that print is disposal-noise, the clean number is 23x. What to watch next: H1 2026 LFL revenue and the FY2026 organic growth guide. A recovery to mid-single-digit organic at Core Reckitt closes the multiple gap on its own; another quarter at sub-1% LFL means the discount is not a discount at all.