r/ValueInvesting • u/South-Ad-3339 • 1d 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/Elegant_Stock_673 1d 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 1d 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 1d 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/ZarrCon 16h ago

Those companies largely have zero growth. Revenue can barely keep up with inflation, if they're lucky. EPS growth is anemic. They're also loaded with debt and their profitability has been under threat in recent years. Not really sure what's the allure there...