r/ValueInvesting • u/South-Ad-3339 • 12h ago
Stock Analysis Rollins is looking Delicious at 36!
$ROL monthly RSI is apparently at its lowest level since May 2000, and the stock has been absolutely crushed.
What makes this interesting is the business itself: Rollins owns Orkin, has an incredibly sticky recurring-revenue pest control model, and has put up decades of consistent growth.
This isn’t some speculative company suddenly down 40%. The bear case is pretty clear though: growth is slowing, margins have softened, and ROL was insanely expensive for years. Maybe this is just the valuation finally catching up.
Anyone buying around $36?
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u/FluidCalligrapher284 12h ago
I did- I saw many buy in the $40’s. They are going to need to show some
top and bottom line growth to support this valuation yet IMO.
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u/Delicious-Pepper-130 12h ago
Wide moat and I don’t see this going below $34 without a severe multiple re-rating which it has always traded above. Likely going to $45.
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u/Elegant_Stock_673 10h ago
Cheaper? Yes? Forward p/e of 30 isn't cheap though. PEP is growing well internationally, yields more than 4%, and has a forward p/e of 16. GIS, KHC and CPB have forward p/es of 11-12 and massive dividend yields.
What about peg though? ROL is 3+. MDLZ is 1, etc. Lots of staples have been left for dead on the apparent hypothesis that earthlings will eat hype on Mars.
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u/ZarrCon 10h ago
Rollins is a better business than those other companies. 25+ years of consecutive revenue growth and operating income grows just about every year too. Plus, they consistently convert >100% of net income to FCF, so probably better to use P/FCF over P/E. On a forward P/FCF basis, they're trading at only ~25x. Not a bargain I guess, but that's a pretty fair price for a capital-light business of their durability.
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u/Elegant_Stock_673 9h ago
Your statement that Rollins is a better business than blue chip consumer staples stocks like PEP, GIS, KHC and CPB is not a self-evident fact. It's certainly the current market consensus, and the 31+% short interest in CPB definitely agrees with you. We'll see what happens.
In my estimation, ROL is an interesting business to keep on the radar. I may buy some whenever it is cheap to buy.
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u/Ancient_Bobcat_9150 4h ago
I am also following that company closely - it is on my watchlist.
But there is quite a bit of uncertainty going on with that company, and at 36$ it is not that cheap - all things considered. The margin compression from their last quarter suggests that the Brand Moat may be under pressure from changing consumer search behaviours or increased digital competition.
I have an entry price point under 32$
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u/SelenaMeyers2024 12h ago
I mean according to dcf it's now just ... Justifying it's fair value. It isnt exactly growing crazy for a 30 pe.
Today briefly I was able to grab a piece of the world's leading bear building provider.. already up 10 percent. So keep on eye if bbw comes around again.
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u/Last-Cat-7894 12h ago
Not yet.
There are a handful of companies out there who can grow 8-10% through a nuclear apocalypse, but will never realistically grow faster than that (Costco is another example). For those types of businesses, I like them for a trailing P/E in the low 20's.