Rollins, Inc. ROL is currently benefiting from healthy organic revenue growth driven by strong technician and customer retention.
With expected earnings per share growth rate of 8.5% for 2019 and a market cap of $13.7 billion, it is a stock that investors should retain in their portfolios.
We observe that shares of Rollins have gained 15.7% year to date, compared with 19.2% rise of the industry it belongs to.
What are the Positives?
Demand for Rollins’ services is currently in good shape despite a slowdown in the residential construction market, driven by rise in disposable and per capita income, lower unemployment rate and improving consumer confidence. In terms of non-residential, strength in the economy has been driving demand for offices and commercial buildings, a trend that will likely continue in the near to mid-term.
In the fourth quarter of 2018, Rollin’s revenues increased 7.2% year over year with 1.6% growth coming from acquisitions and 5.6% from pricing and organic growth. Rollins is in excellent financial health, with plenty of ongoing cash flow generation, almost no debt and only modest recurring capex needs.
Despite riding on significant growth prospects, Rollins is not free from overhangs. The company is witnessing escalation in costs resulting from acquisitions, rising gasoline costs and lease expenses. IT and advertising costs are also on a rise. Moreover, Rollins’ policy of acquiring a large number of companies could result in some integration risks. Nevertheless, we believe that favorable growth dynamics and a strong financial profile bode well for Rollins.
Zacks Rank and Stocks to Consider
Currently, Rollins has a Zacks Rank #3 (Hold).
Some better top-ranked stocks in the broader Zacks Business Services sector are Copart CPRT, Booz Allen Hamilton BAH and Automatic Data Processing ADP, each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term expected EPS (three to five years) growth rate for Copart, Booz Allen and Automatic Data Processing is 20%, 14.6% and 13%, respectively.
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Rollins, Inc. (ROL) : Free Stock Analysis Report
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