ROLLINS INC (NYSE:ROL) – A Quality Stock with Strong Fundamentals

ROLLINS INC (NYSE:ROL) stands out as a potential candidate for quality investors, meeting key criteria for long-term growth, profitability, and financial health. The company, a global provider of pest and termite control services, demonstrates consistent revenue and earnings growth, high returns on capital, and a strong balance sheet.

Why ROLLINS Fits the Quality Investing Profile

• Revenue & EBIT Growth: Over the past five years, ROLLINS has delivered an annual revenue growth of 8.7%, while EBIT growth has been even stronger at 15.7%. This indicates improving operational efficiency and pricing power.
• High ROIC: The company’s Return on Invested Capital (excluding cash and goodwill) is an impressive 124.56%, well above the 15% threshold for quality stocks. This suggests effective capital allocation and strong competitive advantages.
• Strong Profit Quality: With a five-year average Profit Quality (FCF/Net Income) of 123.95%, ROLLINS converts nearly all its earnings into free cash flow, a sign of financial strength and operational efficiency.
• Low Debt Burden: The Debt-to-Free Cash Flow ratio stands at 0.81, meaning the company could pay off its debt in less than a year using current cash flows. This reflects a conservative financial structure.

Fundamental Analysis Summary

ROLLINS earns a fundamental rating of 7/10, with particularly high scores in profitability (9/10) and financial health (7/10). Key strengths include:

• Profit Margins: Operating margin of 19.27% and net margin of 13.78%, both above industry averages.
• Dividend Growth: A 14.46% annual dividend growth rate over the past decade, though the payout ratio is somewhat high at 63.98%.
• Valuation: The stock trades at a premium (P/E of 55.88), but this may be justified by its growth prospects and profitability.

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Disclaimer

This is not investment advice. Always conduct your own research before making investment decisions.