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Rollins, Inc. ROL has an impressive Growth Score of A. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of quality and sustainability of its growth. Rollins’ earnings for 2020 are expected to rise 6.9%.
The stock has gained 77.3% in the year-to-date period compared with 60.4% rise of the industry it belongs to.
Factors That Bode Well
While the residential business continues to be strong, commercial business is improving steadily since April. In the third quarter of 2020, revenues of $583.7 million increased 4.9% year over year. Residential revenues recorded 10.6% year-over-year growth.
Rollins’ debt level declined quarter over quarter. Total debt at the end of third-quarter 2020 was $170 million, down from the $256 million recorded at the end of the prior quarter. The total debt to total capital ratio of 0.15 was lower than the previous quarter’s 0.23 and the industry’s 0.22. Lower debt to capitalization ratio indicates that the proportion of debt to finance the company’s assets is declining and so is the risk of insolvency.
Further, cash and cash equivalent balance of $95 million at the end of the third quarter was enough to meet the short-term debt of $16 million.
Rollins’ shareholder-friendly efforts are impressive. Consistent dividend payment underscores the company's commitment to shareholders and underline its confidence in business. The company paid out dividends of $153.8 million, $152.7 million and $122 million in 2019, 2018 and 2017, respectively.
Rollins is witnessing escalation in costs resulting from acquisitions and IT-related expenses. In addition, the company’s subsidiaries are embroiled with a number of lawsuits, claims or arbitrations that allege its services caused damage. This is further adding to costs. Hence, the company's bottom line is likely to be under pressure going forward.
Zacks Rank and Stocks to Consider
Rollins currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader Zacks Business Services sector are CRA International, Inc. CRAI, Gartner, Inc. IT and Insperity, Inc. NSP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Long-term earnings (three to five years) growth rate for CRA International, Gartner and Insperity is estimated at 13%, 13.5% and 15%, respectively.
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